Dollar drops due to ISM Services PMI

Source: Dukascopy Bank SA


At exactly 15:00 GMT, the US Institute for Supply Management published its Purchasing Managers Index. The markets expected the index to show good conditions in the sector, but the actual data disappointed. Due to this reason the US Dollar sharply declined.

The index is an aggregate number for a survey of sales managers at top US firms. Managers reply by ticking how they see the sector doing. The reply range goes from 0 to a 100. A final average reading above 50 indicates that the sector is doing well, but a reading below 50 is seen as bad. Note that in most cases it is near the 50 mark. During the last decade, only during the Covid crash the markets observed two months near 45.0 and 40.00.

This month, the market expected the reading to be at 53.0, but the actual number is 52.6. The difference form the forecast indicates the United States Services sector is doing well, but not as good as expected. Namely, the numbers indicate less economic activity in the sector, which in turn means less demand for USD in services. The lower local demand reduces the value of the USD.

US Dollar index declined 35 base points or 0.33% during the announcement, before recovering half of the losses just ten minutes after the event.
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