US ISM Services PMI Climbs to Six-Month High; Dollar Climbs
Services Sector Activity Increases
The Institute for Supply Management (ISM) revealed that US services sector activity jumped in August, hitting 54.5—and recording a six-month pinnacle comfortably north of the median forecast of 52.5 and up from 52.7 in July. This marks an eighth consecutive month in expansionary territory for the services PMI.
Anthony Nieves, Chair of the Institute for Supply Management, commented: ‘There has been an increase in the rate of growth for the services sector, reflected by increases in all four subindexes that directly factor into the composite Services PMI and faster supplier deliveries. Sentiment among Business Survey Committee respondents varies by industry; however, the majority of panelists are positive about business and economic conditions’.
When asked in a Bloomberg interview whether the Fed has a grip on inflation (given the Prices Paid subindex jumped to 58.9 in August, up from 56.8 in July), Nieves directed the interviewer to one of the ISM survey’s respondents who thought they [the Fed] were doing a ‘great job’ in taming inflation.
The target range probabilities for the Fed rate decision on 20 September remain largely unmoved following the release, with the market all but fully pricing a no-change (current target rate: 5.25%-5.50%).
Where Does This Leave the Greenback?
The aftermath of the services data guided the US Dollar Index northbound (sending major peers lower, such as Europe’s single currency and the British pound, with the former extending losses south of its 200-day SMA and the latter approaching the upper boundary of its 200-day SMA).
The Dollar Index is now on the doorstep of a notable resistance on the daily timeframe at 105.04, which may step into the frame tomorrow. This follows last week’s almost picture-perfect rebound from its 200-day simple moving average in the shape of a bullish engulfing candle on the daily chart. Technically, this was an expected move, according to this week’s Weekly Market Insight, where the Research Team highlighted that the monthly chart had ample room to stretch its legs and nudge higher.
Dollar Index: Monthly and Daily Charts
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