Dollar pares loss after better-than-expected data
The U.S. dollar pared its losses against some of its rivals after a gauge of service-sector activity came in stronger than expected, pointing to strength in the U.S. economy and lifting expectations that the Federal Reserve will continue to tighten monetary policy in 2017.
Where did currencies trade?
The ICE U.S. Dollar Index DXY, +0.02% which measures the U.S. currency against six rivals, was off 0.1% at 93.458 on Thursday morning in New York. The WSJ U.S. Dollar Index BUXX, +0.05% —a broader measure of the greenback—also slipped 0.1% to 86.57.
European currencies were helped by better-than-expected purchasing managers index readings on the service sector. The euro EURUSD, -0.0170% rose to $1.1765 against the dollar, up from $1.1746. Similarly, the British pound GBPUSD, -0.0528% strengthened to $1.3253, versus $1.3239 late Wednesday.
Compared with the Swiss franc USDCHF, +0.0103% the greenback bought 0.9749 francs, slightly up from 0.9737 late Wednesday.
Against the Japanese yen USDJPY, +0.00% the buck slipped to ¥112.72, compared with ¥112.85.
The U.S.-Canadian dollar pair USDCAD, +0.0481% slipped to C$1.2482 from C$1.2486 late Wednesday.
What drove the market?
On the data front, the Institute for Supply Management’s nonmanufacturing index for September showed an uptick to 59.8, compared with the MarketWatch consensus estimate of 55.7, and the August figure of 55.3, giving the dollar reason to pare some of its losses across the board. A reading above 50 indicates expansion.
Janet Yellen delivered the opening remarks at a conference on community banking at the St. Louis Fed Wednesday afternoon, where she refrained from commenting on monetary policy.
Friday’s release of nonfarm payrolls and unemployment data for September is in focus for traders, as the data are expected to give further clues regarding the likelihood of a December interest rate increase by the Federal Reserve.
What are market participants saying?
With all eyes on Friday’s jobs release, technical traders are awaiting indication for future direction of the dollar index. “A disappointing figure may encourage short term bears to target 93.00,” Lukam Otunuga, research analyst at online broker FXTM said. “In an alternative scenario a daily close above 93.70 should open a path back towards 94.00.”
“Sterling received a lifeline on Wednesday, after U.K. services unexpectedly accelerated in September, easing some concerns over the health of the economy,” Otunuga added.
What other data was in focus?
The Markit services PMI was reported at 55.3 for September, slightly below the August figure of 56.
ADP reported that private-sector payrolls added 135,000 jobs in September, compared with 228,000 in the previous month.
Meanwhile in Europe, the eurozone services PMI for September came in at 55.8, compared with a previous flash reading of 55.6 and the August figure of 54.7, pushing the euro higher and pointing to a good fourth quarter for growth.