The USD got crushed for most of last week, as the sentiment improved on prospects of the FED stopping rate hikes after May’s 25 bps hike, which is still not a certain thing. EUR/USD climbed to 1.0920s, but on Friday we saw a reversal and USD buyers came back, pushing the buck more than 100 pips higher across the board. Last night the USD advance continued in the early hours when the market opened, but the USD retreat resumed again and escalated further after the ISM manufacturing report which was released a while ago, showing another contraction in activity.

US March 2023 ISM Manufacturing Survey

• March ISM manufacturing index 46.3 points vs 47.5 prelim
• February ISM was 47.7 v
• Prices paid 49.2 points vs 51.0 estimate.
• February was 51.3 points
• Employment 46.9 points vs. 49.1 last month
• New orders 44.3 points vs. 47.0 last month
• Production 47.3  points vs 47.3 last month
• Order backlog 43.9 points vs. 45.1 last month
• New export orders 47.6 points vs. 49.9 last month
• Imports 47.9 points versus 49.9 last month

Comments in the report:

• “Orders and production are fairly flat month over month. Lead times have stabilized in most areas, so looking at reducing commitments on new orders, except for a few strategic electronic buys with lead times that are still too long.” [Computer & Electronic Products]
• “Sales a bit down, and budgets being cut with a greater emphasis on savings.” [Chemical Products]
• “Business is doing generally well, with input costs falling in some areas and rising in others.” [Food, Beverage & Tobacco Products]
• “Sales are slowing at an increasing rate, which is allowing us to burn through back orders at a faster-than-expected pace.” [Transportation Equipment]
• “Lead times are still improving, but prices continue to face inflationary pressures. Prices of steel and steel products are going up some. Hydraulic components are still facing extended lead times. We are increasing inventory levels of imports due to global uncertainty from the ongoing war in Ukraine and threats from China.” [Machinery]
• “Overall, (our) first quarter is going better than planned, with sales increases of about 7 percent versus a budget of 4.5 percent. However, sales volume is pulling down our automotive original equipment manufacturer (OEM) side, which is the majority of our business. We believe the second quarter will be hard but are holding to our outlook.” [Fabricated Metal Products]
• “Business is still slow overall. Customers have not yet picked up orders at pre-pandemic levels.” [Apparel, Leather & Allied Products]
• “Overall, things feel more stable in the first quarter 2023 than they did throughout 2021-22. Customer demand is — as expected — growing well, and the overall supply environment is far better than the previous two years. This is not to say there are not challenges; there absolutely are. However, there are fewer issues cropping up each week, and supply challenges are generally more like the ‘typical’ issues we experienced before the pandemic. We are closely monitoring the global banking situation, but no impacts have been experienced or are expected at this time. Ongoing tensions between the U.S. and China are another issue to watch.” [Miscellaneous Manufacturing]
• “New orders are starting to soften and supplier deliveries are improving slightly. This is allowing us to reduce (our) backlog and build a buffer in some categories. The supply chain disruption — particularly in electronics — is still significant compared to pre-pandemic conditions.” [Electrical Equipment, Appliances & Components]
• “Overall, business continues to remain strong. We are still experiencing supply chain issues on several indirect supplies.” [Primary Metals]

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