The dollar gained broadly after ISM Prices Paid fell sharply and four central bankers in Sintra warned inflation is not defeated. EURUSD dropped to 1.1378. Sterling was the only major to beat the greenback. Friday's payrolls are the next test.
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The dollar closed broadly higher on Tuesday, the DXY up 0.20% to 101.388, after a session that mixed a softer ISM manufacturing print with a cautious message from four central bank heads in Sintra.
Federal Reserve Chair Jerome Powell, ECB President Christine Lagarde, Bank of England Governor Andrew Bailey, and Bank of Canada Governor Tiff Macklem shared a stage at the ECB Forum. The message was consistent: inflation has improved but the job is not done. Policy will stay data dependent. Forward guidance is losing its grip as a tool. The four also spent time on AI – optimistic about its potential, uncertain about its effect on jobs, prices, and financial stability.
The June ISM Manufacturing PMI came in at 53.3, a tick below the 54.0 consensus and down from 54.0 in May. Still, the index has held above the 50.0 expansion line for six straight months after a 10-month contraction. ISM notes that a PMI above 47.5 has historically signaled broader economic expansion.
Beneath the headline, the report showed moderation. New orders eased to 56.0 from 56.8. Production slowed to 52.2 from 54.3. Employment improved to 49.7 from 48.6 but stayed below 50.0, meaning manufacturing payrolls still contracted. New export orders slipped back into contraction at 48.5, pointing to softer overseas demand.
The most encouraging number was on inflation. The Prices Paid index fell sharply to 73.0 from 82.1, well below the 78.0 consensus. Input cost pressures eased meaningfully. Supplier deliveries slowed less than in May, suggesting supply chains are still improving. Inventories stayed in contraction as manufacturers kept stock levels lean.
Construction spending was little changed in May, rising 0.1% to a seasonally adjusted annual rate of $2.210 trillion after an upwardly revised April. Through the first five months of 2026, total spending of $858.4 billion was down 2.7% from the same period in 2025. Private construction was flat – residential rose 0.3%, nonresidential fell 0.3%. Public construction rose 0.5%, led by educational and highway projects.
Currency moves
The dollar gained against six of the seven major currencies. The euro was the weakest, falling 0.38% to 1.1378. The Australian dollar dropped 0.36% to 0.6894. The New Zealand dollar slipped 0.11% to 0.5670. The Swiss franc and Canadian dollar fell 0.15% and 0.13% respectively.
Against the yen, USDJPY edged up 0.01% to 162.56 after touching a new 40-year high of 162.83 in the U.S. session before pulling back.
The only currency to beat the dollar was sterling. GBPUSD rose 0.13% to 1.3277, making the pound the strongest major on the day.
Equities and rates
U.S. stocks ended lower. The Dow was near unchanged. The S&P 500 fell 0.22%. The Nasdaq dropped 0.66%. Meta announced early in the day that it would look to sell its excess AI capacity. The word "excess" hit a market built on scarcity. Meta shares rose on the new revenue angle. AI infrastructure and chip stocks sold off.
Treasury yields moved higher with a steeper curve. The combination of moderating ISM prices and cautious central bank language did not push yields lower. The market read the Sintra message as a reminder that rate cuts are not imminent.
The better read
The simple take is that the dollar rallied on a mixed data day. The better read is about positioning. The ISM Prices Paid drop is the kind of number that would normally weaken the dollar by reinforcing a disinflation narrative. It did not. The dollar held gains and added to them. That suggests the market is already pricing a slower disinflation path than the data alone would justify. The Sintra message reinforced that: four central bankers saying the last mile is the hardest.
For the euro, the 1.1378 close puts EURUSD back near the lower end of its recent range. The ECB cut rates in June and Lagarde gave no signal that another is coming soon. The market is watching the spread between U.S. and German two-year yields, which widened again on Tuesday.
For sterling, the resilience is notable. GBPUSD held above 1.3270 despite broad dollar strength. The Bank of England has been slower to signal cuts than the Fed or ECB. That rate differential is supporting the pound.
The next data point is Friday's U.S. employment report. A soft payrolls number would test the dollar's ability to hold these gains. A strong one would push USDJPY toward a test of 163.
What would confirm the dollar's move
The dollar's strength holds if Friday's payrolls come in above 200,000 and average hourly earnings stay firm. A miss below 150,000 would reverse the Sintra-ISM dollar bid and put EURUSD back toward 1.1450.
The ISM Prices Paid drop is a signal that input cost pressures are easing. If the PPI and CPI prints later this month confirm that trend, the dollar's rate advantage narrows. That is the risk for dollar longs. For now, the market is betting the Fed waits longer than the data alone would suggest.
Prepared with AlphaScala research tooling and grounded in primary market data: live prices, fundamentals, SEC filings, hedge-fund holdings, and insider activity. Each story is checked against AlphaScala publishing rules before release. Educational coverage, not personalized advice.