🏭 PMI — The Early Warning System of the Economy
💡 The Lesson
If you want to know where a currency is heading before GDP or inflation data confirm it, watch the PMI.
It’s the first clue of whether an economy is heating up or slowing down — and smart traders treat it like radar.
📊 What Is PMI?
Purchasing Managers’ Index (PMI) measures business activity in key sectors (manufacturing and services).
It surveys company managers on orders, hiring, and production.
The scale is simple:
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Above 50 → Expansion
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Below 50 → Contraction
Example:
Eurozone Manufacturing PMI = 54.2 → factories growing → EUR tends to strengthen.
Next month: drops to 47.8 → contraction begins → EUR weakens.
🏦 Why It Moves Currencies
PMI is forward-looking.
GDP tells what already happened — PMI hints at what’s coming.
If businesses report rising orders and strong demand, central banks may prepare to raise rates.
If orders collapse, policymakers turn dovish fast.
📈 Example:
U.S. ISM Manufacturing PMI:
A few weeks later, inflation data confirm it — but the market already moved.
⚙️ Pro Tip — Watch the Services PMI
Modern economies depend more on services than factories.
That’s why Services PMI now has stronger impact on currencies like USD, EUR, and GBP than Manufacturing PMI.
🚀 Takeaway
PMI is like a leading indicator for economic weather.
When it rises above 50, confidence returns and currencies rally.
When it falls below 50, business slows and central banks start worrying.
If you want to trade fundamentals early — trade PMI reactions.
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