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US ISM, the start of a leg lower? – Danske Bank

FXStreet (Edinburgh) - Allan von Mehren, Chief Analyst at Danske Bank, sees the key indicator correcting lower in the upcoming periods.

Key Quotes

“The US ISM manufacturing report declined more than expected to 56.6 (consensus: 58.5) from 59.0 in August. The details were also on the soft side”.

“ISM reached very high levels over the summer and it is only natural that we see some moderation in line with growth expectations of 3-3.5% growth in H2 down from the 4.5% pace in Q2”.

“Indeed, ISM is likely to have overshot on the upside, which is partly why we see a correction lower”.

“We expect ISM to fall a bit further in the coming months”.

“With weakness in all other regions of the world and the USD strengthening rapidly, it was a matter of time before ISM manufacturing came down from the very high level as the manufacturing sector is the most exposed to export markets”.

“Overall, domestic demand in US is still strong and we expect continued robust growth. But it is likely that data will surprise a bit on the downside in the short term as expectations have generally been raised a lot and our models point to a moderation in growth”.

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