The U.S. services sector showed sturdy progress in September, with the Services PMI rising to 54.9 from 51.5 in August, the Institute for Supply Management (ISM) reported, beating the market forecast of 51.7.
The report also noted an escalate in the Prices Paid Index, a key indicator of inflation, which rose to 59.4 from 57.3, while the Employment Index fell to 48.1 from 50.2.
Market reaction
The US Dollar Index (DXY) continues its uptrend well and is trading at six-week highs near the 102.00 barrier following the release of a stronger-than-expected ISM PMI. The additional improvement in the index is also associated with a decline in yields in the US across the entire curve.
Today’s price in US dollars
The table below shows the current percentage change of the United States Dollar (USD) against the major listed currencies. The US dollar was strongest against the British pound.
| USD | EUR | GBP | JPY | BOOR | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.11% | 1.18% | 0.37% | 0.27% | 0.53% | 0.62% | 0.33% | |
| EUR | -0.11% | 1.07% | 0.26% | 0.13% | 0.42% | 0.50% | 0.21% | |
| GBP | -1.18% | -1.07% | -0.79% | -0.92% | -0.64% | -0.57% | -0.83% | |
| JPY | -0.37% | -0.26% | 0.79% | -0.11% | 0.15% | 0.19% | -0.06% | |
| BOOR | -0.27% | -0.13% | 0.92% | 0.11% | 0.27% | 0.34% | 0.07% | |
| AUD | -0.53% | -0.42% | 0.64% | -0.15% | -0.27% | 0.07% | -0.19% | |
| NZD | -0.62% | -0.50% | 0.57% | -0.19% | -0.34% | -0.07% | -0.28% | |
| CHF | -0.33% | -0.21% | 0.83% | 0.06% | -0.07% | 0.19% | 0.28% |
The heat map shows the percentage changes of the major currencies relative to each other. The base currency is selected from the left column and the quote currency from the top row. For example, if you select the US dollar from the left column and move along the horizontal line to the Japanese yen, the percentage change displayed in the box will represent USD (base)/JPY (quote).
The section below was published as a preview of the US ISM Services PMI for September at 08:00 GMT.
- September sees slight improvement in the U.S. ISM PMI.
- The US service sector is expected to remain in an area of expansion.
- Investors still support the gentle landing scenario of the American economy.
The United States is scheduled to release its Services Purchasing Managers Index (PMI) on Thursday, with the September index expected to rise to 51.7 from the previous 51.5.
In August, economic activity in the U.S. services sector improved for the second month in a row, showing the sector’s resilience and thereby reinforcing the view of a vigorous U.S. economy.
Moreover, the ISM Business Activity Index dropped to 53.3 (from 54.5) in August, suggesting some loss of business activity dynamics, while the ISM Services New Orders Index increased by 1.14 percentage points. to 53.0, indicating greater demand for services. On a less positive note, the ISM Services Paid Index rose slightly to 57.3 (from 57.0), highlighting continued price pressure.
What can you expect from the ISM Services PMI report?
Inflation in the US has been on a clear downward trend, which has enabled the Federal Reserve (Fed) to focus on the domestic labor market when deciding on future interest rate movements. That said, inflation as measured by the Personal Consumption Expenditures (PCE) price index last week confirmed this view. While the core PCE index was unchanged, up 2.7% in the year to August (compared to the previous month’s 2.6%), the core PCE index rose 2.2%, below consensus and lower than previous growth amounting to 2.5%.
Ahead of the release, an ISM services PMI reading in line with expectations is likely to have minimal impact on the US dollar (USD) as it would confirm the current market view that a gentle landing is entirely achievable amid inflation pressures that even remain above the Fed’s target of 2 %, are gradually heading in the right direction. However, a sharper-than-expected decline could have a more significant impact as the services sector has been a key driver of the economy in recent years. A sudden decline could awaken risk aversion, threatening the idea of a sleek economic transformation and awakening demand for safe and sound assets such as the dollar.
When will the ISM Services Purchasing Managers Index report be published and what impact may it have on EUR/USD?
The Services Purchasing Managers’ Index (PMI) conducted by the Institute for Supply Management (ISM) will be published on Thursday at 14:00 GMT.
According to Pablo Piovano, senior analyst at FXStreet: “[T]A continuation of the selling process may initially bring EUR/USD to its 55-day simple moving average (SMA), currently at 1.1024, above the September low of 1.1001 (September 11).”
On the other hand, strength attacks should motivate the spot to break the yearly high of 1.1214 (September 25). Once this area is cleared, the pair can begin a probable move towards the 2023 high of 1.1275 (July 18),” Pablo adds.
Finally, Pablo suggests that “above the 200-day SMA of 1.0874, the constructive outlook for the pair should remain unchanged.”
Economic indicator
ISM service prices paid
ISM Non-Manufacturing PMI Index published by Institute for Supply Management (ISM) shows business conditions in the US non-manufacturing sector, taking into account expectations for future production, recent orders, inventories, employment and deliveries. This is an vital indicator of the overall economic health of the US. The ISM Price Paid represents business sentiment regarding future inflation. A high reading is seen as positive for the USD, while a low reading is seen as negative.
