US Dollar Hovers at Session Highs as February Services PMI Data Disappoints
US Services PMI, Jerome Powell, Fed, US Dollar – Talking Points
- US ISM Feb Services PMI 56.5 vs. Jan 59.9, 61 est.
- USD easing slightly from session highs above 97.60
- Fed Chair Jerome Powell continues to testify in Congress
The ISM Services PMI report for February showed a slowdown in the US services sector, as fears mount over an economic slowdown. The ISM non-manufacturing survey showed activity slowed to 56.5, the lowest reading in 12 months. This came in well below the consensus estimate of 61, and the January print of 59.9. This is the third consecutive month the index has declined, despite Covid cases falling and restrictions around the country beginning to ease. On Tuesday, an ISM survey of manufacturers showed solid growth in February.
US Economic Calendar
Courtesy of the DailyFX Economic Calendar
Focus continues to remain on Capitol Hill, where Fed Chair Jerome Powell (technically Chair Pro Tempore) gives a semi-annual update to Congressional leaders. Powell is likely to be pressed on inflation and the path to normal policy, similar to Wednesday’s session in the House of Representatives. The Fed has come under pressure from policymakers and the public to combat rampant US inflation, which currently sits at 40 year highs. With the March FOMC meeting upcoming, Chair Powell is likely to reaffirm that the Fed is ready to move away from pandemic-era emergency policy.
US Dollar Index (DXY) 1 Hour Chart
Chart created with TradingView
Despite the weak ISM print, the US Dollar continued to remain in positive territory. Dollar strength has been underpinned by Euro weakness, given the events unfolding in Eastern Europe. As I mentioned in my piece yesterday, the Dollar looks set to continue benefitting from safe-haven flows.
The US Dollar Index has been penned in by the 97.75 level for the last week or so, with this level offering bears multiple opportunities to fade. Risks appear to be skewed to the upside for the Greenback, as we inch closer to a normalization of Fed policy. However, traders should remain nimble as the Euro could benefit significantly from any de-escalation in the Russia-Ukraine conflict. Given the construction and weighting(s) of the US Dollar Index, a sudden jump in EUR/USD could see the Dollar Index reverse course toward 97.00.
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--- Written by Brendan Fagan, Intern
To contact Brendan, use the comments section below or @BrendanFaganFX on Twitter
DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.