US Services PMI, US Dollar, Federal Reserve – Talking Points
- US ISM Apr Services PMI 57.1 Vs Mar 58.3
- Markets now turn to this afternoon’s pivotal FOMC policy meeting
The April Services PMI came in slightly cooler than expected at 57.1, which was down from the March print of 58.3 and the consensus estimate of 58.5. The reading above 50 means that the services sector grew for the 23rd consecutive month, despite coming in lower than expected. Notably, the prices paid metric came in at an all-time high of 84.6, up from the March print of 83.8. This reflects the ongoing inflationary pressures that continue to threaten both businesses and consumers, and broadly speaking, overall economic activity in the United States.
Key Report Highlights
- Business Activity Index at 59.1
- New Orders Index at 54.6
- Employment Index at 49.5
- Prices Paid at 84.6
US Economic Calendar
Courtesy of the DailyFX Economic Calendar
The US Dollar has cooled its rapid advance of late as EUR/USD broadly held the 1.05 area. The Dollar gained tremendously throughout March as central bank policy divergence drove price action. As the Fed continues on its path towards a “neutral rate,” the European Central Bank and Bank of Japan both have yet to move. This saw EUR/USD fall to 1.05, with USD/JPY skyrocketing to 130. Even with the weakness in the Yen, the BoJ elected to continue its bond purchases, which may possibly worsen the weakness in the Yen.
US Dollar Index (DXY) 1 Hour Chart
Chart created with TradingView
All eyes now turn to the Federal Reserve, where a 50 basis point rate hike is the consensus expectation across Wall Street. Specific plans on balance sheet reduction are also expected to be revealed by the FOMC, which will help paint a clearer picture of the Fed’s intended path to normalization. As of this morning the Fed is effectively priced for a 75 bps hike in June, and this will be one area to watch after 2 PM this afternoon. With the bar for a hawkish surprise relatively high, a slight unwind of such aggressive bets could see a minor lift for risk assets. For more on the magnitude of this FOMC meeting, click here.
Fed Funds Rate Expectations (June Meeting)
Courtesy of CME Group
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— Written by Brendan Fagan, Intern
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