FX.co ★ US manufacturing strengthens

US manufacturing showed its strongest expansion in nearly five years in October. The ISM manufacturing index rose by one point to 55.5, the second-highest reading in more than four years, beating all economist forecasts. Remember that readings above 50 points indicate expansion.

The report shows the expansion is now in its tenth consecutive month after roughly three years of industrial weakness. Production accelerated sharply: the production component hit its highest level since late 2021. The new orders component also rose to the strongest level since July, signaling durable factory demand.

Strength in demand is supported by a resilient economy and elevated business spending. US GDP grew faster in Q3 than in any quarter over the past year. Companies invested in data centers, AI, and equipment, while consumer spending remained steady. As a result, manufacturers filled more orders and ramped output.

Improving business activity also showed up in hiring: factory employment expanded for the fourth straight month. Higher output and hiring support both corporate revenues and household income, though the persistence of the upswing depends on whether the current order flow holds. Inflationary pressures remain visible along supply chains. The ISM input price measure eased to 75.2 from September but remains well above pre-Middle East-conflict levels.

In my view, October's data points to a genuine industrial recovery rather than a one-off production spike — orders and payrolls rose alongside output. Still, inflation and supply frictions limit the upside for companies and may slow price disinflation. If orders continue to grow, industrial activity will likely keep expanding in the months ahead, although rising costs will constrain producer margins. That's constructive for the economy and for the US dollar.

EUR/USD technicals

Buyers should consider reclaiming 1.1200 to target a test of 1.1230. From there, a move to 1.1255 would be possible, though breaking higher without support from large players would be difficult. On the downside, look for significant buyer interest near 1.1170. If buying activity is muted there, wait for a break of 1.1140 or consider long positions from 1.1110.

GBP/USD technicals

Sterling buyers should aim to take the nearest resistance level of 1.3412 to target 1.3444. A break above that level would be quite challenging. The most distant target would be 1.3467. On the downside, bears will try to seize control at 1.3379. A break below that level would hit bulls and could push GBP/USD toward 1.3354 and then 1.3324.