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US Dollar Remains Strong despite April ISM Non-Manufacturing Decelerates

US Dollar Remains Strong despite April ISM Non-Manufacturing Decelerates

Trang Nguyen,

THE TAKEAWAY:U.S. non-manufacturing activity grew less than expected in April but > Business activity, new orders, employment growth and prices all decelerated > USD remains strong versus major peers

U.S. economic activity in the non-manufacturing sector continued to expand at a slower pace in April as sale has slightly improved, business conditions has leveled off, and fuel and food continued to be a challenge.

The report released by Non-manufacturing Institute of Supply Management (ISM) report showed that its April non-manufacturing index disappointingly declined to 53.5 percent from 56.0 percent registered in March. The print is well below consensus forecast of 55.3 percent, according to seventy-four economists polled by Bloomberg News survey.

The Business Activity index, which is considered the most important in 10 sub-indexes reported, slipped to 54.6 percent, 4.3 percentage points lower than the 58.9 percent reported in March. This corresponds with survey responses that “business is slowing and projections for the rest of the year are being lowered”. Similarly, the New Orders index fell 5.3 percent to 53.5 percent as a result of contraction in four industries including mining, utilities, health care and public administration.

Employment index, which rose 1 percent to 56.7 percent in March, unexpectedly decreased by 2.5 percent to 54.2 percent, pointing to slower pace of job creation. Additionally, the Prices index tumbled 10.3 percent to 53.6 percent, suggesting price increase at a significantly slower rate in April compared to March. Nonetheless, respondents remain concerned about rising fuel costs and the impact on shipping, transportation and petroleum-based product costs.

EURUSD 1-minute Chart: May 3, 2012

050312_U.S._April_ISM_Non-Manufacturing_Composite_body_Picture_2.png, US Dollar Remains Strong despite April ISM Non-Manufacturing Decelerates

Chart created using Strategy Trader – Prepared by Tzu-Wen Chen

The greenback remained strong versus most of its major currency counterparts after the lower-than-expected ISM non-manufacturing report. As seen on the 1-minute EURUSD chart above, the currency pair dropped approximately 30 pips from 1.3180 to 1.3150. At the time this report was written, the euro saw some correction, trades at $1.3160.

--- Written by Trang Nguyen, DailyFX Research Team for DailyFX.com

To contact Trang, email tnguyen@dailyfx.com

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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