Brown Brothers Harriman’s Elias Haddad notes that the May ISM manufacturing index points to a more restrictive Federal Reserve (Fed) stance and a firmer US Dollar (USD), with the headline index rising to a four-year high. He highlights that the JOLTS report remains key for assessing US labor market downside risks, as sustained strength in hiring and low layoffs would help stabilize the outlook for the Dollar.

Fed data backdrop underpins Dollar

"The May ISM manufacturing index released yesterday supports a more restrictive Fed policy stance and firmer USD."

"The headline index improved more than expected to a four-year high at 54.0 vs. 52.7 in April driven by a faster expansion in new orders and slower contraction in employment."

"The Prices Paid sub-index unexpectedly dipped to a two-month low at 82.1 vs. 84.6 in April but is still indicative of upside risk to inflation."

"The April Job Openings and Labor Turnover Survey (JOLTS) is up next (3:00pm London, 10:00am New York). In March, the JOLTS report showed the hiring rate rose to a two-year high while layoffs continued to be low and stable."

"If sustained, this trend would significantly ease downside risks to the US labor market."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)