U.S. Manufacturing Surpasses Expectations, Trade Uncertainty Persists

(MENAFN- Investor Ideas) Investorideas, a go-to platform for big investing ideas releases market commentary from Quasar Elizundia, Expert Research Strategist at Pepperstone.

"In a session marked by trade uncertainty and the recent tariff measures announced by President Trump, the U.S. Economy has provided an important reprieve thanks to the latest manufacturing PMI figures. The index, published by the Institute for supply Management (ISM), stood at 50.9 in January, exceeding expectations and breaking a prolonged 26-month streak in contraction territory. This recovery, although encouraging, has been partially overshadowed by the intense focus on tariff announcements, especially following the apparent extension granted to Mexico until March.

The return of manufacturing to expansionary territory is a particularly significant signal, as the sector had experienced a prolonged contraction, raising doubts about the industrial health of the U.S. economy. While manufacturing is not the primary economic driver of the U.S., its recovery points to greater business confidence and a potential improvement in domestic demand.

Among the PMI components, notable increases were seen in new orders (55.1) and production (52.5), as well as a rebound in employment (50.3) after several months of workforce adjustments.

Meanwhile, the strength of the U.S. dollar (USD) has persisted throughout the session, recording a gain of approximately 0.3%.

However, it is worth noting that at the session's peak, the rally exceeded 1%, confirming that volatility remains amid headlines related to trade disputes. In contrast, the Mexican peso (MXN) managed to recover from a previous drop of more than 3% and is now trading with a positive bias, driven by the news that tariffs on Mexico would be postponed until March. This extension provides room for diplomatic negotiations to progress and, for now, reduces the risk of an immediate impact on sensitive sectors of the Mexican economy.

Despite these optimistic PMI-related news, international markets remain on alert over the possibility of an escalation in the trade war. Recent statements about a potential review of agreements with Canada and China's negotiating stance keep tensions high, which could slow the economic momentum achieved by the manufacturing sector.

In the coming weeks, the focus will be on the progress of tariff discussions and their potential impact on business confidence and investment decisions by U.S. companies. In this volatile scenario, manufacturing data offers a glimmer of optimism, but the outcome of trade disputes will continue to shape the direction of markets and the strength of the dollar

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