Yesterday, the US ISM Manufacturing PMI missed forecasts coming in at 48.7 vs. 49.6 expected and 49.2 prior. This wasn't such a big miss as it was still in the range of estimates, but it was nonetheless a miss and the market reacted accordingly.
I'd say that the market overreacted a bit, probably due to the notable drop in new orders which is a proxy for demand. The final reading of the S&P Global US Manufacturing PMI a bit earlier showed an even greater improvement, so the divergence is a bit puzzling although it happened other times in the past.
The market generally gives more weight to the ISM PMIs given that they have a longer track record, especially the Manufacturing PMI which goes back as far as the 1948. I'd say that one bad report amid a series of good ones shouldn't be enough for a panic but it should nonetheless set aside inflation fears.
Today, now that Swiss CPI is out of the way, there's no other market moving event in the European session and the focus will switch to the US Job Openings data in the US session.
14:00 GMT/10:00 ET - US April Job Openings
The US Job Openings are expected to fall to 8.350M vs. 8.488M prior. The last report showed once again a decrease as the labour market continues to come into better balance. The quits rate has also eased to a new cycle low and that should be good news for inflation as it generally leads wage growth.
The market's pricing continues to jump between 1 and 2 rate cuts by the end of the year. I don't think the data today will change much on that front (unless we get a big surprise), but lower figures should reinforce the disinflationary narrative and likely support bonds, which should translate in a weaker US Dollar.
