Edit
The US dollar was already trading with a heavier bias before the
shockingly poor service ISM. The August non-manufacturing ISM
tumbled to 51.4, a six-year low, from
55.5 in July. Markit, which does its own
survey, showed a smaller decline in its August read to 51.0 from 51.4 in July.
This was up slightly from the
preliminary 50.9 estimate.
shockingly poor service ISM. The August non-manufacturing ISM
tumbled to 51.4, a six-year low, from
55.5 in July. Markit, which does its own
survey, showed a smaller decline in its August read to 51.0 from 51.4 in July.
This was up slightly from the
preliminary 50.9 estimate.
In any case,
the weakness in the manufacturing ISM, the softer than expected employment
data, and now the weaker services ISM makes some economists fret about Q3 GDP
and lower the odds of a rate hike by the FOMC later this month. Recall that before the weekend,
after the employment and trade figures, the Atlanta Fed’s GDP tracker pointed
to 3.5% Q2 GDP, up from 3.2% previously. The NY Fed’s model was little changed on the week at 2.8%.
the weakness in the manufacturing ISM, the softer than expected employment
data, and now the weaker services ISM makes some economists fret about Q3 GDP
and lower the odds of a rate hike by the FOMC later this month. Recall that before the weekend,
after the employment and trade figures, the Atlanta Fed’s GDP tracker pointed
to 3.5% Q2 GDP, up from 3.2% previously. The NY Fed’s model was little changed on the week at 2.8%.
The implied
yield on the September Fed funds futures is 41 bp presently. The CME, where the contracts are traded, and our calculation, suggest this is consistent with
about 15% chance of a hike.
yield on the September Fed funds futures is 41 bp presently. The CME, where the contracts are traded, and our calculation, suggest this is consistent with
about 15% chance of a hike.
The ISM pushed
on an open door as the dollar extended its losses. The euro approached the $1.1275 area, which is an
important retracement objective. While it may fray, the market may be
reluctant to push much through there with the ECB meeting looming (Thursday).
Sterling is approaching $1.35. A break of that would likely encourage
more sterling shorts to cover. The post-referendum high is near $1.3565.
The dollar was sold through JPY102.20 to near
JPY102.00 before finding a bid. A break set up a test of JPY101.70.
on an open door as the dollar extended its losses. The euro approached the $1.1275 area, which is an
important retracement objective. While it may fray, the market may be
reluctant to push much through there with the ECB meeting looming (Thursday).
Sterling is approaching $1.35. A break of that would likely encourage
more sterling shorts to cover. The post-referendum high is near $1.3565.
The dollar was sold through JPY102.20 to near
JPY102.00 before finding a bid. A break set up a test of JPY101.70.
The dollar-bloc
currencies are powering ahead. Pushing out expectations for a Fed
hike takes some pressure off those currencies.
The Australian and New Zealand dollars are up around 1.2% today, while
the Canadian dollar is up only half as much. It is more directly impacted by the presumably
US economic weakness. Meanwhile, the oil bulls, finding the Saudi-Russia
talk of a freeze undermined, have turned their attention to Iran. Iran
would be quite happy to let others freeze their output (though elevated levels) to support prices, while it continues to
restore output to pre-embargo levels.
currencies are powering ahead. Pushing out expectations for a Fed
hike takes some pressure off those currencies.
The Australian and New Zealand dollars are up around 1.2% today, while
the Canadian dollar is up only half as much. It is more directly impacted by the presumably
US economic weakness. Meanwhile, the oil bulls, finding the Saudi-Russia
talk of a freeze undermined, have turned their attention to Iran. Iran
would be quite happy to let others freeze their output (though elevated levels) to support prices, while it continues to
restore output to pre-embargo levels.
The Dollar Index
has been sold through 95.00. It is approaching a trendline drawn
off the May, June and August lows. It is found near 94.45 today. A
break of that would signal a move toward 93.60-94.00.
has been sold through 95.00. It is approaching a trendline drawn
off the May, June and August lows. It is found near 94.45 today. A
break of that would signal a move toward 93.60-94.00.
Poor Services ISM Sends Greenback Reeling
Reviewed by Marc Chandler
on
September 06, 2016
Rating: