The US Dollar (USD) softened against the Pound (GBP) and Euro (EUR) on Monday after data showed that activity growth in the service sector of the world’s largest economy slowed to its lowest level in six months.
According to Markit’s flash services Purchasing Managers Index (PMI) the pace of growth in the USA’s service sector slowed in October to its lowest level in six months. The Index reading slipped to a figure of 57.3 in October, down from the 58.9 recorded in the preceding month. Economists had been expecting a figure of 58.0.
In a PMI, any figure above 50 indicates expansion whilst a number below indicates contraction.
Markit’s flash Composite PMI, which measures activity in both the manufacturing and services sectors also softened. The PMI fell to 57.4 in October, down from the 59.0 recorded in the previous month.
‘The flash PMI survey data shows the pace of economic growth easing for a fourth consecutive month in October. The weakened growth of new orders and downturn in business optimism suggest that growth and hiring could slow further in the coming months. The October readings indicate that the pace of economic growth looks set to moderate in the fourth quarter, down to perhaps 2.5% or less if the PMI falls further in the coming months,’ said Markit chief economist Chris Williamson.
After the release of the PMI data, the Pound advanced. The Euro also edged higher as investors turned their attention away from disappointing German business confidence data. The IFO report showed that business sentiment in the Eurozone’s largest economy fell to its lowest level since December 2012.
Taking some of the edge off the poor PMI data was a separate report, which showed that the number of Americans buying homes increased slightly in September.
According to the data released by the National Association of Realtors its seasonally adjusted homes sales index rose by 0.3% over the past month.
Despite the rise, the index remains half a percentage point below its 2013 average.
Also putting pressure on the US Dollar was the publication of the latest Dallas Federal Reserve Manufacturing Business Index. The index fell from 10.8 to 10.5 in October suggesting a slowdown in activity in the region.
US Dollar Exchange Rate Forecast
The US Dollar is likely to have a volatile week due to the number of important data releases due. Tuesday sees the release of the latest Durable Goods and CB Consumer Confidence data.
Positive figures for both and the ‘Greenback’ are likely to regain lost ground.
With little in the way of UK, data due the Pound is set to move because of external global events. The Euro meanwhile is likely to remain under pressure over concerns that the Eurozone is sliding towards a triple dip recession.
US Dollar (USD) Exchange Rates
[table width=”100%” colwidth=”50|50|50|50|50″ colalign=”left|left|left|left|left”]
Currency, ,Currency,Rate ,
US Dollar,
,Pound Sterling,0.6198 ,
US Dollar,,Euro,0.7866 ,
US Dollar,,Canadian Dollar,1.1228 ,
US Dollar,,Australian Dollar,1.1352 ,
Pound Sterling,,US Dollar,1.6135 ,
Euro,,US Dollar,1.2712 ,
[/table]
