US Macros Unlikely to Offer Strong Support to USD

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The latest ISM Non-Manufacturing PMI rose for the straight 3rd month. Expectations were for the current numbers to come in lower, However, they ended up beating forecasts.

The markets were projecting a result of around 54.9 points, with the actual print coming in at 57.3 points from 55.5 prior.

Orders Increased

The numbers tell a story; business activities remained healthy with the service sector being the most prominent.

The flow of orders increased month to month and made for the best read so far for the year.

This 1.8 point rise was unexpected, as the median was forecast to show a dip from the previous month.

Coronavirus Still a Major Concern

Due to the impact of the coronavirus, traders were waiting to see how far the actual numbers would slip. However, they were pleasantly surprised.

That said, now that the coronavirus is running rampant across the globe, the majority of purchasing managers are concerned about supply disruption if things get any worse.

China’s Caixin Manufacturing PMI earlier on Monday showed the biggest dip in numbers yet. It dropped from 51.1 to 40.3. The expectation was for a slip to 46. However, the actual result proved to be much worse than anticipated.

As such, the current ISM numbers largely negate the possible impending effect that the virus may likely cause going forward.

The USD rallied briefly on the news, but dulled out and drifted lower in a quiet trading session.

EURGBP and other majors marked a brief rally after an initial dip, but the response stayed largely muted. 

This could be attributed to the Fed slashing interest rates by 50 basis points earlier, hampering USD gains.

Winners & Losers

While most non-manufacturing industries showed growth, there were some who fell behind.The list topper was the services sector, such as food and accommodation, followed by management & support services.

Mining/health/insurance and real estate, on the other hand, showed growth.

Those who failed to capitalize were arts, entertainment, agriculture, fishing and hunting among others.

These results do make sense, as the fear of the coronavirus prevented the masses from frequenting crowded places like cinemas or dining out.

Going forward, with increasing deaths in the US due to the virus, this sector can see the numbers dwindling further. However; we can expect more demand in the healthcare sector if the situation worsens.

It would be of great interest to see if the ISM numbers will show a jump next month as well. By then, we will have some, if not most, implications the coronavirus may have on the business activities in the US.

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The USD/JPY hourly chart shows the post ISM effect: a short rally to the north halting and drifting quietly lower.

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