US Dollar Losses Fade on ISM Non-Manufacturing Index Beat


ISM Non-Manufacturing Talking Points:

  • ISM non-manufacturing index registered 56.9, beating expectations of 55.4 and climbing above the previous month reading
  • Respondents of the survey noted that the strong economy is driving sales figures, but global trade risks linger
  • US Bond yields and US Dollar edge up on the strong data which suggests the US economy may not be slowing as quickly as previously thought

The latest report from the Institute of Supply Management was released on Wednesday morning to show that US non-manufacturing industries continue to grow. The reading for May came in at 56.9, beating expectations of 55.4 and up from 55.5 last month. This marks the 112th month of consecutive growth in the services sector. Business activity remains positive, but growth is slowing.

ISM NON-MANUFACTURING INDEX

ISM

The release caused a short-lived jump in the US Dollar and Treasury Yields. However, the impact of the release seems to have been overshadowed by this morning’s ADP job numbers, which revealed a stark weakening in the labor market after a reading of 27k job additions versus estimates of 185k. Traders may see this as a preface to Friday’s US nonfarm payrolls data being released Friday – a closely watched economic indicator by markets and could impact the Federal Reserve’s monetary policy decisions in the months ahead. Overnight swaps are now pricing in a June rate cut probability of 31.8 percent, almost double the odds priced in by markets yesterday.

DXY US DOLLAR INDEX PRICE CHART: 1-MINUTE TIME FRAME (JUNE 05, 2019 INTRADAY)

TNX

Despite most ISM survey respondents remaining largely upbeat on the state of the US economy, trade issues continue to be a concern. Employment activity continues to be positive component within the services sector, which posted its 6th month of consecutive growth. The beat in the non-manufacturing sector contrasts the weakness in the manufacturing sector, however, which came in under estimates for May. This could be due to the fact that the US services sector may be less susceptible to trade issues in the economy.

–Written by Thomas Westwater, Intern Analyst for DailyFX.com

Contact and follow Thomas on Twitter @FxWestwater

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