Strong US Data That Didn't Help the Dollar
Very positive US ISM services data was neutralized by a sour employment component, which kept dollar gains limited, especially since today’s standout UK PMI services data really stole the spotlight.
Today’s US ISM services report printed better than expected, at 56.0 versus 53.2 forecast, hitting its highest level since February and providing the US dollar (USD) with a small boost in mid-morning North American trade. The subcomponents of the report were generally better as well, with new orders rising to 57, business activity rising to 60.4 from 51.7, and export orders increasing by two points to 49.5.
The one sour note in the report was the weaker employment data, which dropped back to 53.2 from 54.7 the month prior. The report confirmed that US employment growth may be starting to stall in the third quarter. However, with the ISM services data released one trading day after Friday’s non-farm payrolls (NFP) report, much of the impact was diminished since the markets had already absorbed the less-than-stellar labor data.
Currency markets were generally quiet, taking their cue from placid equity markets, which were off by less than 25 basis points in morning trade.
Earlier today, however, the UK PMI services report printed at its best level since 2006, lifting GBPUSD through the 1.5350 level in mid-morning London trade. The unit now stands ready to attack the key 1.5400 figure, which has been a major point of resistance in recent weeks, and could trade towards the yearly highs of 1.5700 from there.
See related: The Economic Boom Nobody Saw Coming
By Boris Schlossberg of BK Asset Management