- ISM index for non-manufacturing disappoints expectations at 54.4
- All economic releases fall under taper scrutiny
- EUR/USD rises temporarily
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After the ISM non-manufacturing index set a new seven year high in August, the index declined significantly in September, sending the US Dollar lower against the Euro.
The Institute for Supply Management reported the index measuring non-manufacturing sector activity at 54.4, disappointing expectations for 57.0 and down from 58.6 in August. The 54.4 print indicates the 45th consecutive month of sector growth, as it was reported above the 50.0 neutral line. The non-manufacturing employment index declined 4.3 percentage points to 52.7 in September, according to ISM.
All economic releases from the US are currently being inspected with the underlying question of how it will affect the Fed’s decision when to taper its 85 billion US Dollars of monthly quantitative easing. The Fed defied expectations in September by not beginning to taper its stimulus, and the central bank also lowered its GDP forecast for 2013 to 2.0% to 2.3% growth. The Fed has pegged its monetary policy to the unemployment rate, and therefore declining economic indicators like the ISM index may delay the taper decision and are therefore US Dollar negative.
That’s why the US Dollar declined as much as 25 pips against the Euro following the disappointing non-manufacturing index release. However, those losses were temporary and EUR/USD continues to trade slightly above the 1.3600 level. A previous 6-month high at 1.3451 may provide support, while resistance may come in at 1.3710, which is the current yearly high and near the top of an upward trend channel.
Chart created by Benjamin Spier using Marketscope 2.0
-- Written by Benjamin Spier, DailyFX Research. Feedback can be sent to email@example.com .