ISM Manufacturing PMI expected to hold steady as sector shows resilience

• The US ISM Manufacturing PMI is expected to tick lower in March from the previous 52.4.
• Investors will pay attention to the Prices and Employment subindexes ahead of the NFP release.
• EUR/USD is under pressure and could test 2026 lows with encouraging US data.

The Institute for Supply Management (ISM) is scheduled to release the March Manufacturing Purchasing Managers’ Index (PMI) on Wednesday. Market participants anticipate it would ease modestly to 52.3 from the 52.4 posted in February.

The index is a trusted measure of the health of the United States (US) manufacturing sector, closely followed by market players. It is based on a survey conducted by ISM among companies around the US. The index revolves around the 50 threshold: a reading above it indicates an expanding sector, while a reading below it indicates contraction.

What to expect from the ISM manufacturing PMI report?

The February ISM report showed that economic activity in the manufacturing sector remained in expansion territory, but eased from the January print of 52.6. Still, “economic activity in the manufacturing sector expanded in February for the second straight month but only the third time in 40 months,” according to the official report, indicating the sector is still struggling to overcome the COVID-19 pandemic setback.

The ISM Manufacturing PMI report also shows that the New Orders Index expanded for the second straight month in February after four straight readings in contraction, registering 55.8, down from January’s figure of 57.1. The Prices Index increased to 70.5 from January’s reading of 59, and its highest reading since June 2022, while the Employment Index ticked higher to 48.8 from 48.1 in the previous month.

“Of the six largest manufacturing industries, four (Chemical Products; Machinery; Transportation Equipment; and Computer & Electronic Products) expanded in February”, Susan Spence, Chair of the ISM Manufacturing Business Survey Committee, said.

Market participants will not only look at the headline for sectoral expansion or contraction, but also at the inflation and employment sub-indexes. As noted above, the Prices Index hit its highest in almost four years in February, before United States (US) President Donald Trump decided to join forces with Israel to attack Iran, resulting in a massive increase in Oil prices, which in turn triggered global inflation concerns.

Also, the employment-related component gains relevance ahead of the Nonfarm Payrolls (NFP) report, scheduled for release on Friday. Employment has become less of a concern in shaping the Federal Reserve’s (Fed) monetary policy decisions, but it would still affect investors’ perception of the central bank’s next move.

Finally, the headline reading will be responsible for the initial market reaction. Generally speaking, a better-than-anticipated outcome, with a reading above the 50 threshold, should boost demand for the US Dollar (USD), as it would both signal economic progress and increased odds of an upcoming interest rate hike. The opposite scenario is also valid, with a discouraging result putting pressure on the Greenback and boosting bets on an on-hold Fed.

When will the ISM Manufacturing PMI report be released and how could it affect EUR/USD?

The ISM Manufacturing PMI report is scheduled for release at 14:00 GMT on Wednesday. Ahead of the release, the US Dollar (USD) retains its safe-haven-inspired strength across the FX board, putting a pause on its rally. The EUR/USD pair trades around the 1.1500 mark, retaining its bearish bias according to technical readings in the daily chart.

Valeria Bednarik, FXStreet Chief Analyst, notes: “The EUR/USD pair is at risk of retesting its 2026 low of 1.1411 in the upcoming sessions, given persistent war-related concerns and anticipated encouraging macroeconomic data. From a technical standpoint, sellers are in control. The daily chart for EUR/USD shows technical indicators aiming south within negative levels, while the pair develops below a now flat 20-day Simple Moving Average (SMA) currently around 1.1670. The weekly peak on Monday was set a handful of pips below the latter, reinforcing the idea of selling interest aligned sound it.”

Bednarik adds: “An upbeat ISM report could push EUR/USD towards the monthly low, with a break below it exposing the 1.1360 region. A discouraging reading could help EUR/USD advance temporarily, with resistance at 1.1560, the 1.1600 area and finally at 1.1670. Given dominant USD demand, however, and advance towards the latter seems unlikely, and any temporal gain will likely attract fresh bearish interest.”

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