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05/06/24
202
USD Higher After Services Sector Data Comes in Stronger Than Expected
On Wednesday, the U.S. dollar was higher after data showed that in May the services sector in the biggest economy in the world rebounded after contracting the prior month, underlining uncertainty surrounding the expected beginning of the Federal Reserve’s rate-cutting cycle later in the year.
According to the Institute for Supply Management, its nonmanufacturing purchasing managers index last month rose from 49.4 in April to 53.8. The reading in May was the highest since Aug. and overshot the estimates of economists who had expected a reading of 50.8.
In mid-morning trading, the U.S. dollar index, which measures its strength against 6 other major currencies, was 0.3% higher at 104.41. On Tuesday it dropped to 103.99, the lowest since Apr. 9.
The euro, the biggest element in the dollar index dropped after the data and traded 0.1% lower at $1.0865.
Investors are now focused on Thursday’s ECB meeting, in which the bank is generally expected to decrease its deposit rate from 4%, a record high.
The Bank of Canada (BOC) on Wednesday cut interest rates by 0.25% to 4.75%. This was its first cut in 4 years. The bank said if inflation continued to ease, more easing was likely.
The U.S. dollar gained 0.4% to C$1.3729.
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