FXTM information and reviews
OctaFX information and reviews
XM information and reviews
FXCC information and reviews
Libertex information and reviews
FxPro information and reviews

COVID-19 puts on the brakes

25 November 2020

Producer sentiment is poised for a November pull-back to still elevated levels, with headwinds from rising COVID-19 fears and emerging lockdown disruptions. The early month components were broadly lower, and hence the ISM-adjusted average of the major sentiment indexes is expected to moderate to a still-solid 57 from 58 in October, 56 in September, and 54 in both August and July.  Upward pressure on production remains in place due to lean inventories and continued strong sales, despite new restrictions on travel and restaurant activity.

For the Empire State report, the headline dropped to 6.3 from 10.5 in October, and 17.0 in September. April’s -78.2 headline marked an all-time low. The Philly Fed headline fell to 26.3 after surging to 32.3 from 15.0 in September. In Philly’s case, the April -56.6 headline was a low back to July of 1980. The component series in the two November reports also mostly exhibited pull-backs, prompting declines in the ISM-adjusted measures for both releases.

The various components of the Empire State and Philly Fed reports are correlated with their counterparts in the later month releases, and this correlation is stronger when the respective components of the Empire State and Philly Fed are averaged together. The production components from the two releases both declined sharply, while despite declines elsewhere, the various employment components were mostly higher on the month.

Producer sentiment meanwhile, has moved with oil prices over the past decade, as the US factory sector is increasingly exposed to the oil industry. The big oil price drop in 2014-15 pulled the ISM-adjusted average of the producer sentiment measures off its short term peak of 55.2 in July of 2014 to a low of 48.5 in February of 2016 that corresponded with the bottom in oil prices. Producer sentiment rose to remarkably high levels through late-2018 with resumed firmness in oil prices to a peak for the ISM-adjusted average of 58.8 in May of 2018 before a gradual moderation. Oil prices plunged in 2020 with the COVID-19 pandemic and OPEC price war, before rebounding over the summer, leaving a similar gyration for the sentiment measures, though price appreciation has now stalled.

The historical impact of surprises in the producer sentiment reports on bond yields and the Dollar varies across the remaining reports for the month. Bubble graphs from Action Economics, show the immediate reaction in yields and FX moves to headline surprises to the upside or downside for the remaining reports. The Chicago-ISM has the weakest correlation with FX moves, but is strongly correlated with yield swings. The yield relationship to downside surprises is slightly stronger than with upside surprises.

The ISM is as correlated with yields, as is the Chicago-ISM. But, unlike the Chicago-ISM, we see more consistent reactions in FX moves when the ISM beats expectations. The ISM-NMI also has a strong correlation with yields, though this correlation is weaker than with the ISM and Chicago PMI. The ISM-NMI and ISM have the best correlation of these reports with FX moves.

Nevertheless, the early-month surveys of producer sentiment revealed declines across the major components and headlines, with headwinds from rising COVID-19 fears and emerging lockdown disruptions. The impact of COVID-19 peaked in April with shutdowns fully in effect, and a rebound through Q3 and into Q4, as sales rose and inventories fell.




Trading the SPDR S&P 500 ETF Trust
Trading the SPDR S&P 500 ETF Trust

The Standard & Poor’s (S&P) 500 Index measures the market capitalisation of the top 500 US largest corporations. Many traders and investors use the S&P 500 Index as a benchmark...

23 Sep 2022

Gold pauses as traders await Fed decision
Gold pauses as traders await Fed decision

The anticlimactic performance of gold continues as the prospect of aggressive rate hikes by central banks around the world amid heightened inflationary pressures...

21 Sep 2022

Developing a forex trading plan: All you need to know
Developing a forex trading plan: All you need to know

All forex traders have different backgrounds, market views, risk appetite, thought processes and expectations. Therefore, traders should not just blindly follow what other traders do...

20 Sep 2022

NordFX: Forex and Cryptocurrencies Forecast for September 19-23, 2022
NordFX: Forex and Cryptocurrencies Forecast for September 19-23, 2022

The World Bank said last week that risks of a recession in 2023 are growing amid simultaneous tightening of monetary policy by the world's leading Central banks and the energy crisis in Europe...

19 Sep 2022

Gold gains traction on the back of weaker dollar
Gold gains traction on the back of weaker dollar

The precious’ recent rally from its near year-to-date lows could be attributed to the broader dollar weakness observed in the past week, even though it remains elevated near its 20-year highs...

14 Sep 2022

NordFX: Forex and Cryptocurrencies Forecast for September 12 - 16, 2022
NordFX: Forex and Cryptocurrencies Forecast for September 12 - 16, 2022

The past week was marked by two significant events. First, the EUR/USD pair updated its 20-year low on Tuesday, September 06 once again, falling to 0.9863...

12 Sep 2022

Editors' Picks

HFM information and reviews
IronFX information and reviews
FXCM information and reviews
NordFX information and reviews
Vantage information and reviews
FP Markets information and reviews
FP Markets

© 2006-2022 Forex-Ratings.com

The usage of this website constitutes acceptance of the following legal information.
Any contracts of financial instruments offered to conclude bear high risks and may result in the full loss of the deposited funds. Prior to making transactions one should get acquainted with the risks to which they relate. All the information featured on the website (reviews, brokers' news, comments, analysis, quotes, forecasts or other information materials provided by Forex Ratings, as well as information provided by the partners), including graphical information about the forex companies, brokers and dealing desks, is intended solely for informational purposes, is not a means of advertising them, and doesn't imply direct instructions for investing. Forex Ratings shall not be liable for any loss, including unlimited loss of funds, which may arise directly or indirectly from the usage of this information. The editorial staff of the website does not bear any responsibility whatsoever for the content of the comments or reviews made by the site users about the forex companies. The entire responsibility for the contents rests with the commentators. Reprint of the materials is available only with the permission of the editorial staff.
We use cookies to improve your experience and to make your stay with us more comfortable. By using Forex-Ratings.com website you agree to the cookies policy.