Weak start in Europe as we await latest ISM manufacturing PMI

• Bumpy start in Europe as German concerns grow
• All eyes on US ISM manufacturing PMI as we build towards Friday’s jobs report
• CHF declines after 1.1% Swiss inflation figure

A jittery start in Europe has seen indices within the region drifting tentatively lower as traders continue to move with caution in anticipation of the key economic data due in the days ahead. The prospective closure of German Volkswagen factories serves to highlight the downfall of Europe’s largest economy, with yesterday’s PMI survey confirming another month of contraction to add to the two-years behind us.

The manufacturing sector remains in focus today, with the US ISM manufacturing PMI released in the afternoon. Coming off the back of a concerning slump that saw the July metric fall to an eight-month low, traders will be on the lookout for further cause for concern as we weight up the trajectory of the US economy. Crucially, the divergence between higher prices and lower output for the manufacturing sector provides a worst-case scenario that the Federal Reserve will want to see come to an end sooner rather than later. Elsewhere, this week looks to gradually build towards Friday’s jobs report, with traders on the lookout for additional signs of a potential impending recession. Coming off the back of a surprise jump in unemployment that saw the key metric rise to the highest rate since October 2021, the trajectory of unemployment will be crucial in determining the market expectations for the Fed going forward.

Elsewhere, the Swiss economy has come into focus today, with inflation and growth data ensuring fresh volatility for the CHF. Coming off the back of three months of gains for the franc, the decline to 1.1% for Swiss CPI inflation highlights the need for further easing at the SNB. The early CHF declines seen today highlight the fact that rates will likely tumble further despite already standing at a measly 1.25%.