- Reviewed by James Stanley, Nov. 24, 2021
The ISM manufacturing index plays an important role in forex trading, with ISM data influencing currency prices globally. As a result, the ISM manufacturing, construction and services indicators can provide unique opportunities for forex traders, which makes understanding this data (and how to prepare for its monthly release) essential.
Talking points:
- What is ISM?
- How ISM impacts currencies
- How forex traders use ISM data
What is ISM?
The Institute for Supply Management (ISM) measures the economic activity from both the manufacturing side as well as the service side. Monthly ISM data releases include key information such as changes in production levels.
ISM was formed in 1915 and is the first management institute in the world with members in 300 countries. The data gleaned from its large membership of purchasing managers means ISM is a reliable guide to global economic activity, and as a result, currency prices. A country’s economy is often determined by its supply chain, as a result, the monthly ISM manufacturing and non-manufacturing PMI economic news releases[1] are carefully watched by forex traders around the world.
ISM Surveys
ISM publishes three surveys - manufacturing, construction, and services – on the first business day of every month. The ISM Purchasing Managers Index (PMI) is compiled from surveys of 400 manufacturing purchasing managers. These purchasing managers from different sectors represent five different fields:
- Inventories
- Employment
- Speed of supplier deliveries
- Production level
- New orders from customers.
In addition, ISM construction PMI is released on the second business day of the month, followed by services on the third business day. Forex traders will look to these releases to determine the risks at any given time in the market.
How does ISM Impact currencies?
The Manufacturing and Non-manufacturing PMIs are big
