04 May 2010

US ISM Manufacturing : 60.4 for Apr10

  • Current uptrend in ISM Mfg index since the bottom at 32.5 in Dec08 is very evident.
  • [Reuters chart not updated. Latest data for Apr10 at 60.4 is marked by the horizontal pink line]
  • My data only goes back to the year 2000. The high within this period was 61.4 for May04 (data released Jun04); we are now within touching distance of this.
  • Recap recent Fed Funds changes :    1. The last of the post-9/11 rate cuts to 1.00% was made in Jun2003 (entire cycle started in 03Jan01, with cut from 6.50% cut to 6.00%).    2. First rate hike of the next cycle was in Jun04 to 1.25%, to a peak of 5.25% in Jun06.    3. New cycle of cuts started in Sep07, down to current 0-0.25% set in Dec08. (See chart here).
  • Date of start of the previous rate hike cycle = 30Jun04, not long after the peak ISM number for May04 was released. Pure coincidence?
  • To me, carry trades (both Rates and FX) founded on "extended period" assumptions are fast getting into danger territory.
  • Not too bothered when the Fed actually starts tightening. More relevant is when the market snaps and do the Fed's job for them. Long ED Spreads and USD/JPY best positioning vehicles.

No comments: