Discover the twists and turns in the dollar’s recent journey as it faced a rollercoaster ride on January 5. We delve into the impact of contrasting data, from a robust nonfarm payroll report to a concerning slump in the US services sector.
US Services Sector Blues:
The Institute for Supply Management (ISM) revealed a drop in its non-manufacturing index to 50.6 in December, hitting the lowest point since May. Analysts were expecting stability at 52.6 after November’s 52.7. Notably, the ISM’s services sector employment index plummeted to 43.3, marking its lowest since July 2020.
Mixed Reactions and Economic Outlook:
Experts differ in their interpretation, with some, like Andrew Hunter of Capital Economics, seeing a potential recession, while others advise a measured response, citing past inconsistencies between surveys and economic realities.
Dollar’s Performance on the Rollercoaster:
Witness the dollar’s initial 0.4% dip to 102.0 after peaking at 103.10 post a strong job report. However, the week concluded with a 0.6% gain, marking its most significant weekly rise since early December.
Impact of the Jobs Report:
Earlier, the dollar soared on a job report exceeding expectations, featuring 216,000 new jobs and a steady unemployment rate. This raised speculation that the Federal Reserve might delay interest rate cuts.
Rate Futures and Market Sentiment:
Rate futures suggest around five anticipated rate cuts of 25 basis points each for 2024. Post-ISM data, March meeting easing bets increased to approximately 76%, reflecting a shift from the previous week.