US Services PMI Posts Weak Growth – Triggers Risk Averse

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ISM Non Manufacturing PMI dropped to 53.3 points, lower than 53.9 that was expected. The initial reaction of the dollar is a small rise against the vulnerable euro and a drop against the “safe haven” yen and franc.

This is a significant drop from last month’s 54.6 points. It shows that the US economy is still slowing down, though still far enough from contracting. The whole world is slowing down.

The euro is very vulnerable due to the 4 notch downgrade that came from Moody’s on Portugal. Also the pound follows with a drop. On the other hand, the US weakness is enjoyed by the other low yielding, safe haven currencies.

EUR/USD fell down to the 1.4282 support line. It didn’t break lower, and managed to bounce higher, at least for now.

The vast majority of the US economy is in the services sector. This makes this purchasing managers’ indicator extremely important. Not only is it a good gauge for the economy, it is also a great indicator towards the Non-Farm Payrolls.

Last month, the ISM Non-Manufacturing PMI was published after the NFP, so it wasn’t useful. This time, it is released two days ahead of the Non-Farm Payrolls, providing an important indicator. Stay tuned for a preview for the NFP.

Tomorrow we have the all important rate decision and press conference in Europe. See the ECB preview for a guide on Trichet’s code words.

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Yohay Elam – Founder, Writer and Editor I have been into forex trading for over 5 years, and I share the experience that I have and the knowledge that I’ve accumulated. After taking a short course about forex. Like many forex traders, I’ve earned the significant share of my knowledge the hard way. Macroeconomics, the impact of news on the ever-moving currency markets and trading psychology have always fascinated me. Before founding Forex Crunch, I’ve worked as a programmer in various hi-tech companies. I have a B. Sc. in Computer Science from Ben Gurion University. Given this background, forex software has a relatively bigger share in the posts.