American ISM Non-Manufacturing PMI fell to 52.8 points, well below expectations of 57.9 points. This significant slowdown in the economy extends the losses of the greenback against the “safe haven” currencies, but stops the falls against other currencies..
EUR/USD is now retreating to 1.4920 after already hitting 1.4940. Also GBP/USD and AUD/USD are retreating. The initial reaction was a quick gain, but when the magnitude of the drop was digested, they turned around.
The currencies that do enjoy this figure are the Swiss franc and the Japanese yen – the safe haven currencies. USD/CHF is at a new all time low of 0.8560 and USD/JPY plunges to around 80.50.
Earlier in the week, the manufacturing sector exceeded expectations and continued showing strong growth, with a score of over 60 points, only a marginal slide from last month. But the services sector disappointed.
Badly disappointed. The score is way too close to the critical 50 point mark that separates economic growth and economic squeeze. The score was almost at 60 points just two months ago, meaning strong growth, but it deteriorated too fast, and is now too close to flipping into contraction. Jamie Coleman mentions that services make up over 75% of the US economy. So, this dive is very significant indeed.
This lowers the expectations for the Non-Farm Payrolls and joins the weak ADP Non-Farm Payrolls report that also fell short of expectations.
Weaker than expected figures hurt the dollars across the board. But extremely weaker than expected figures, trigger fear of another global slump, and this already separates the so-called safe currencies like the Swissy and the yen, with the more risky, high yield ones such as the Aussie and the Euro.
Update: The dollar is now stronger across the board. Commodity prices and precious metals are falling, with silver being the biggest loser.
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