The US services sector continues looking strong: the ISM non-manufacturing PMI dropped, but to 59 points, better than predicted and still showing very solid growth. However, the employment component is down from the highs: 56 against 59.6 last month. Nevertheless, this is looking goof for the US economy, which focuses on services.
The USD is slightly stronger with currencies dropping around 15 pips against the greenback in the initial reaction. However, the $ is looking better against the majors but actually sliding against commodity currencies.
Within the other components: new orders are at 63.4, only a small drop from July. Business activity is at 63.9 points. Prices paid remain low and slide to 50.8 points.
The ISM Non-Manufacturing PMI (services sector measure) was expected to slide from the super strong 60.3 points in July to 58.1 points for August. This is the last hint towards tomorrow’s Non-Farm Payrolls, and an important one.
The dollar was stable against most currencies, except for the euro, which was hit hard by Mario Draghi. EUR/USD traded around 1.1140, GBP/USD at 1.5273, USD/JPY around 119.80, USD/CAD at 1.3250, AUD/USD just above 0.70 and NZD/USD at 0.6370.
Markit’s final read for its services PMI was upgrade to 56.1
The services sector is the largest in the US and the employment component has a good correlation with the NFP. Signs seen earlier this week were a bit disappointing, with a miss on the ISM Manufacturing PMI and a below expectations ADP NFP.
The Fed said it is data dependent towards its critical September decision on whether to raise or not to raise rates. And this is probably the most important data point.
