The ISM manufacturing number came in at 50.2, higher than the 50 that was forecast. As a result, the real rate gapped up on the print (red arrow), and FXCM’s USDOLLAR basket followed upwards (green arrow).
Manufacturing is expanding. Notwithstanding how close to the line, the market may view a Fed pivot as less likely. I.e. the Fed has more room to be aggressive in its fight to tame inflation.
Given how close the number was in terms of registering as an expansion, the real rate has come back. However, given the inflation release on Friday, an aggressive Fed is undoubtedly a strong probability.