The US ISM Manufacturing PMI for April is due at 14:00 GMT. Forecasts put the index at 53.0, up from 52.7 in March.<\/p>\n
Stronger data can raise expectations of near-term Federal Reserve rate rises, while weaker data can reduce those expectations. Recent comments from Fed Chair Jerome Powell point to a focus on rising inflation pressures.<\/p>\n
Markets will also track the Employment Index, Prices Paid and New Orders. Prices Paid is forecast at 80.0, up from 78.3, and is linked in the text to higher energy prices after the extended closure of the Strait of Hormuz.<\/p>\n
The ISM Employment Index is forecast at 49.0, up from 48.7. EUR\/USD is up 0.17% near 1.1750, close to the 50% Fibonacci level at 1.1745 for the 1.1408 to 1.2082 move.<\/p>\n
The pair is above the 20-day EMA near 1.1703, while RSI is about 56. Resistance levels are 1.1825, 1.1938 and 1.2082, with support at 1.1703, 1.1666, 1.1567 and 1.1408.<\/p>\n
The ISM PMI is a monthly survey-based indicator of US factory activity. Readings above 50 imply expansion and below 50 imply contraction.<\/p>\n
The upcoming manufacturing report is likely to confirm our view that inflation remains the biggest challenge. The high Prices Paid estimate, driven by energy costs from the ongoing Strait of Hormuz closure, suggests cost pressures are not easing. This reinforces the Federal Reserve’s hawkish stance, which we have seen building since their pivot in late 2025.<\/p>\n
For interest rate derivatives, this means the “higher for longer” theme remains firmly in play. We should consider positions that bet against any significant rate cuts this year; Fed Funds futures are pricing in less than a 20% chance of a cut by December. Looking back at the unexpected inflation surge in 2025, the Fed will likely err on the side of caution and maintain tight policy.<\/p>\n
In the currency options market, uncertainty around the EUR\/USD is growing, making volatility a key factor. One-month implied volatility for the pair has already ticked up to 9.8%, reflecting the tension between a strong US economy and persistent inflation. Traders could use straddles to play a potential breakout from the current range, regardless of the direction.<\/p>\n
The direct mention of energy prices makes oil derivatives a clear area of focus for us. The situation in the Strait of Hormuz is reminiscent of the supply shocks we witnessed during geopolitical flare-ups in 2025 that caused WTI crude to spike over $110 per barrel. Buying call options on WTI or Brent futures offers a way to position for further upside with defined risk.<\/p>\n
This environment suggests equity markets could face headwinds, increasing the value of portfolio protection. The VIX index, a measure of expected market volatility, has climbed to 21 from a low of 14 earlier in the year, showing rising investor nervousness. We should consider buying put options on the S&P 500 or purchasing VIX calls as a hedge against a potential market downturn.<\/p>\n
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