On Monday at 15:00 GMT, the Institute for Supply Management (ISM) will release its closely watched Manufacturing Purchasing Managers’ Index (PMI) for December. This survey-based index is a primary gauge of US manufacturing health. The critical dividing line is 50; readings above this threshold signify sector expansion, while readings below indicate contraction.
Economists are forecasting a slight improvement in the headline number to 48.3 for December, up marginally from November’s reading of 48.2.
Context from the November Report The November data revealed that the US manufacturing sector remained in contraction for the ninth straight month, slipping to 48.2 from October’s 48.7. While production figures actually rebounded into expansion territory (rising to 51.4), the overall index was dragged down by continued weakness in new orders and employment.
Specifically, the New Orders Index contracted for the third consecutive month, falling to 47.4. The Employment Index also struggled, dropping to 44 from the previous month’s 46. Meanwhile, inflationary pressures persisted, with the Prices Index climbing to 58.5.
Stephen Stanley, chief US economist at Santander U.S. Capital Markets, noted that the sector is still being hindered by uncertainties surrounding the tariff landscape.
What Investors Are Watching Market participants will be scrutinizing the employment sub-index closely as a lead indicator for Friday’s crucial Nonfarm Payrolls (NFP) report. Given the labor market’s heavy influence on Federal Reserve monetary policy, employment data is a top priority for investors this week.
The headline PMI reading will likely trigger the immediate market response. A surprise breakout above the 50 expansion threshold would signal economic resilience, likely boosting the US Dollar (USD) by reducing expectations for near-term interest rate cuts. Conversely, a disappointing print would pressure the Greenback and increase speculation of a Fed rate cut as early as March.
EUR/USD Technical Outlook Heading into the release, the EUR/USD pair retains a negative tone, though it is currently holding above the 1.1700 support level. Recent geopolitical tensions and thin holiday trading volumes have lent some support to the USD, though not enough to reverse its broader bearish bias.
Valeria Bednarik, Chief Analyst at FXStreet, highlights that EUR/USD finished both November and December with losses. Regarding the upcoming data, she notes:
“While the pair has found buyers near 1.1700, an upbeat PMI result could see it pierce that level. However, for the USD to gain sustained support, the ISM PMI needs to print above the 50 threshold. A decisive break below the 1.1680 zone would likely trigger stop-loss selling, potentially accelerating the slide toward the 1.1600 area before stronger buying interest emerges.”
Conversely, Bednarik advises that a weak report—coming in below expectations or lower than November’s data—would likely cause the USD to drop sharply against major peers. In this scenario, EUR/USD faces immediate resistance at the January 2 high of 1.1765, ahead of the 1.1800 mark. Further gains could push the pair toward the 1.1860 price zone.
