Breaking: ISM Services PMI increased above estimates in September
In September, the US service sector experienced a marked advance, with the Services PMI rising to 54.9 from 51.5 in August, as reported by the Institute for Supply Management (ISM), exceeding the market forecast of 51.7.
The report further noted an increase in the Prices Paid Index, a key inflation indicator, which climbed to 59.4 from 57.3, while the Employment Index declined to 48.1 from 50.2.
Market reaction
The US Dollar Index (DXY) maintains its uptrend well in place and navigates the area of six-week peaks around the 102.00 hurdle in the wake of the release of a stronger-than-expected ISM Services PMI. The extra improvement in the index also comes along with ising US yields across the curve.
US Dollar PRICE Today
The table below shows the percentage change of US Dollar (USD) against listed major currencies today. US Dollar was the strongest against the British Pound.
| USD | EUR | GBP | JPY | CAD | 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% | |
| CAD | -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 percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick 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).
This section below was published as a preview of the US ISM Services PMI for September at 08:00 GMT.
- US ISM Services PMI is seen improving a tad in September.
- The US services sector is expected to remain within the expansionary territory.
- Investors continue to favour a soft-landing scenario of the US economy.
The United States is set to release the Institute for Supply Management’s (ISM) Services Purchasing Managers Index (PMI) on Thursday, with the September index expected to tick higher to 51.7 from the previous 51.5.
In August, the economic activity in the United States (US) services sector improved for the second month in a row, showing the sector's resilience and thus reinforcing the view of a healthy US economy.
Moreover, the ISM Business Activity Index eased to 53.3 in August (from 54.5), suggesting some loss of momentum in business operations, while the ISM Services New Orders Index increased by 1.14 percentage points to 53.0, pointing to stronger demand for services. On a less positive note, the ISM Services Prices Paid Index rose marginally to 57.3 (from 57.0), highlighting still unabated price pressures.
What to expect from the ISM Services PMI report?
Inflation in the US has been on a clear downtrend, allowing the Federal Reserve (Fed) to shift its focus to the domestic labour market when it comes to deciding on future interest rate moves. That said, inflation gauged by the Personal Consumption Expenditures (PCE) Price Index last week reinforced that view. While the core PCE Index remained sticky and rose by 2.7% in the year to August (from the prior month of 2.6%), the headline PCE rose by 2.2%, coming in below consensus and lower than the previous 2.5% increase.
Previewing 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 soft landing is totally achievable amidst inflationary pressures, which even remaining above the Fed’s 2% target, are gradually moving in the right direction. A sharper-than-expected decline, however, could have a more significant impact, as the services sector has been a key driver of the economy in recent years. A sudden contraction could wake up risk aversion, threatening the idea of a smooth economic transition and waking up the demand for safe-haven assets like the Greenback.
When will the ISM Services Purchasing Managers’ Index report be released, and how could it affect EUR/USD?
The Institute for Supply Management’s (ISM) Services Purchasing Managers Index (PMI) will be published on Thursday at 14:00 GMT.
According to Pablo Piovano, Senior Analyst at FXStreet, “[T]he continuation of the selling process could initially drag EUR/USD to the 55-day Simple Moving Average (SMA), currently at 1.1024, which comes ahead of the September low at 1.1001 (September 11)”.
Bouts of strength, on the other hand, should motivate the spot to challenge its yearly top of 1.1214 (September 25). Once this region is cleared, the pair could embark on a probable move to the 2023 high of 1.1275 (July 18)”, Pablo adds.
Finally, Pablo suggests that “while above the 200-day SMA of 1.0874, the pair’s constructive outlook should remain unchanged.”
Economic Indicator
ISM Services Prices Paid
The ISM Non-Manufacturing PMI released by the Institute for Supply Management (ISM) shows business conditions in the US non-manufacturing sector, taking into account expectations for future production, new orders, inventories, employment and deliveries. It is a significant indicator of the overall economic condition in the US. The ISM Prices 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.
Read more.Last release: Thu Oct 03, 2024 14:00
Frequency: Monthly
Actual: 59.4
Consensus: 56.3
Previous: 57.3
Source: Institute for Supply Management
GDP FAQs
A country’s Gross Domestic Product (GDP) measures the rate of growth of its economy over a given period of time, usually a quarter. The most reliable figures are those that compare GDP to the previous quarter e.g Q2 of 2023 vs Q1 of 2023, or to the same period in the previous year, e.g Q2 of 2023 vs Q2 of 2022. Annualized quarterly GDP figures extrapolate the growth rate of the quarter as if it were constant for the rest of the year. These can be misleading, however, if temporary shocks impact growth in one quarter but are unlikely to last all year – such as happened in the first quarter of 2020 at the outbreak of the covid pandemic, when growth plummeted.
A higher GDP result is generally positive for a nation’s currency as it reflects a growing economy, which is more likely to produce goods and services that can be exported, as well as attracting higher foreign investment. By the same token, when GDP falls it is usually negative for the currency. When an economy grows people tend to spend more, which leads to inflation. The country’s central bank then has to put up interest rates to combat the inflation with the side effect of attracting more capital inflows from global investors, thus helping the local currency appreciate.
When an economy grows and GDP is rising, people tend to spend more which leads to inflation. The country’s central bank then has to put up interest rates to combat the inflation. Higher interest rates are negative for Gold because they increase the opportunity-cost of holding Gold versus placing the money in a cash deposit account. Therefore, a higher GDP growth rate is usually a bearish factor for Gold price.