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USD Spikes, Gold Sinks as ISM Services PMI Tops Estimates

USD Spikes, Gold Sinks as ISM Services PMI Tops Estimates

2019-11-05 15:26:00
Thomas Westwater,
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ISM Services PMI Talking Points:

  • The services sector bounced back in October with a reading of 54.7, up from last month’s reading of 52.6
  • USD/JPY surged while spot gold sank after the report crossed the wires with the positive data spurring risk appetite and squashing FOMC rate cut expectations
  • DailyFX Forecasts are published on a variety of markets such as Gold, the US Dollar or the Euro and are available from the DailyFX Trading Guides page. If you’re looking to improve your trading approach, check out Traits of Successful Traders. And if you’re looking for an introductory primer to the Forex market, check out our New to FX Guide.

The Institute for Supply Management released their report on the non-manufacturing sector Tuesday morning, with the headline figure printing 54.7, up from last month’s reading of 52.6. Markets reacted positively to the report crossing the wires as investors fear the recent slowdown in manufacturing may be spilling over into the larger services sector as the counterpart ISM manufacturing reading is in it’s third month of contraction. USD/JPY pushed above the 109.00 mark on the release and Gold breached below 1490.00, a new monthly low.

USDJPY with Gold (XAU/USD) Price Chart: 5 – Minute Time Frame (NOV 5)

USD Price Chart with Gold Price Overlaid ISM Services PMI October 2019

The beat Tuesday morning in the services side of the economy is helping lift concerns of a spillover from the manufacturing sector which is now in it’s third month of contraction according to the counterpart ISM manufacturing sector. While trade wars do not seem to be impacting the services side to the extent of manufacturing there still is concern among survey participants with one respondent stating “Current outlooks for commodities, equipment, and materials indicate purchasing now has leverage. Investment is still hampered by uncertainties in trade, global economic environment, manufacturing and the like.”

ISM SERVICES, NON-MANUFACTURING PMI vs S&P 500 INDEX

ISM Services and Manufacturing PMI Chart of S&P 500 Index Overlay

While markets continue to push higher, buoyed further by this mornings data, traders remain focused on trade war headlines, with positive rhetoric crossing the wires yesterday showing the US is considering the removal of some tariffs. Easing monetary conditions have also helped spur optimism as the Fed has not cut three times this year, however markets are now pricing only a 9% chance for a 4th rate cut this year, evidenced by Fed Fund Futures.

FOMC RATE CUT EXPECTATIONS (DECEMBER 2019)

FOMC Rate Cut Expectations

--Written by Thomas Westwater, Intern Analyst for DailyFX.com

Contact and follow Thomas on Twitter @FxWestwater

DailyFX forecasts on a variety of currencies such as the US Dollar or the Euro are available from the DailyFX Trading Guides page. If you’re looking to improve your trading approach, check out Traits of Successful Traders. And if you’re looking for an introductory primer to the Forex market, check out our New to FX Guide.

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