The US ISM Manufacturing PMI dropped to 48.2 in November, falling short of the expected 48.6 and down from 48.7 in October. This is the ninth straight month the index has been below 50, showing a contraction in the manufacturing sector. The Prices Paid Index rose to 58.5, but the Employment Index fell to 44 and the New Orders Index decreased to 47.4. These numbers highlight weaknesses in several areas of the report.

Market Dynamics

In the market, the US Dollar is dropping, causing the US Dollar Index (DXY) to move closer to the 99.00 support level. Among major currencies, the US Dollar is the strongest against the New Zealand Dollar. The EUR/USD is rising, currently trading at 1.1629. The 200-day Exponential Moving Average suggests further gains, and the 14-day Relative Strength Index supports this upward trend. If it breaks above 1.1625, it could signal a more favorable outlook for the pair. The ISM Manufacturing PMI is an important gauge of business activity. Readings above 50 indicate growth, while numbers below that suggest a decline, impacting the US Dollar’s performance. The next ISM report will be released on December 1, 2025. The disappointing manufacturing data for November confirms a slowdown in the US economy. This reading of 48.2 indicates ongoing contraction, a trend we’ve seen before during broader economic slowdowns, similar to the lead-up to the 2019 interest rate cuts. Therefore, we should expect more speculation about a dovish Federal Reserve in the first quarter of 2026.

Strategic Opportunities

The initial reaction to the data has been a decline in the US Dollar Index, pushing it toward the key 99.00 support level. We should consider buying call options on pairs like EUR/USD and GBP/USD to take advantage of the weaker dollar. With implied volatility rising by about 15% for major currency pairs in the last quarter of 2025, options strategies can provide a defined way to capitalize on this trend. The declining Employment Index is a concern and directly affects our predictions for future interest rates. The Fed Funds futures market now shows a higher likelihood of a rate cut by March 2026, likely increasing from last week’s 30% to over 50%. Positioning in SOFR futures could effectively speculate on the Fed needing to ease policy sooner than expected. While growth is slowing, the rise in the Prices Paid index to 58.5 indicates that inflation is still a concern, presenting challenges for policymakers. This uncertainty may lead to increased market volatility, and we might see the VIX, which has been around 19, rise in the coming weeks. We believe that long positions in gold futures or call options on gold-related ETFs could serve as a hedge against both a weakening dollar and stagflation risk. Create your live VT Markets account and start trading now.

here to set up a live account on VT Markets now