The services sector is cooling down according to ISM, with a significant drop of 2.3 points from 57.1 to 54.8 points in October. In recent months, fluctuations have been more volatile than beforehand. This reflects uncertainty. The employment component does not bode well, with a big drop from 57.2 to 53.2 points. New orders are down from 60 to 57.7 points. Prices are up from 54 to 56.6 points.
The USD is marginally weaker on the publication. It is important to stress that the US elections are left, front and center for markets.
In a separate release, US factory orders rose 0.3%, more or less as expected.
The ISM Non-Manufacturing PMI was expected to slide from a strong 57.1 seen in September to 56 points now, still reflecting robust growth. This is a significant hint towards tomorrow’s Non-Farm Payrolls. See how to trade the NFP with EUR/USD.
The US dollar has been somewhat mixed ahead of the publication: some stabilization in the polls helped it against the euro and commodity currencies, but the safe haven yen continued surging forward. The British pound is in a league of its own today, enjoying strong data, a favorable court ruling that could delay Brexit and a much more hawkish BOE.
Earlier, Markit’s parallel services PMI was confirmed at 54.8 points, no surprises over there. ISM carries more weight in the US. Jobless claims missed with 265K instead of 258K expected.
Here are 3 reasons why the dollar may begin turning around, mostly on the elections updates and most prominently against the euro.
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