When is the US ISM Services PMI and how could it affect EUR/USD? – by hareshmenghani UnitedStates PMI Fed EURUSD Currencies
15:00 GMT this Friday. The gauge is expected to come in at 54.5 for February, down from 55.2 in the previous month. Given that the Fed looks more at inflation than growth, investors will keep a close eye on the Prices Paid sub-component, which is anticipated to decelerate from 67.8 in January to 64.5 during the reported month.
Economists at ING offer a brief preview of the important macro data and write: “Consensus is centred around a marginal decrease from 55.2 to 54.5, which would confirm speculation on recession is too premature and would continue to endorse the Fed’s hawkish rhetoric. We think this should allow further stabilisation of the Dollar around current levels.”Ahead of the key release, retreating US Treasury bond yields prompts some selling around the US Dollar.
Hence, a stronger headline print and higher-than-expected Prices Paid Index should be enough to trigger a fresh leg up in the US bond yields, which, in turn, should help revive the USD demand. Apart from this, looming recession risks should continue to act as a tailwind for the safe-haven buck. This, in turn, suggests that the path of least resistance for the EUR/USD pair is to the downside and any subsequent move up might still be seen as a selling opportunity.
“On the other hand, if the pair returns within the descending channel, sellers could take action and cause EUR/USD to slide toward 1.0560 , 1.0540 and 1.0500 , .” Eren adds further.
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