© Reuters. FILE PHOTO: US dollar banknotes are shown in this illustration taken on March 10, 2023. REUTERS/Dado Rović/Illustration/File photo
Written by Karen Britel
NEW YORK (Reuters) – The dollar fell on Monday on news that the U.S. services sector barely grew in May as new orders slowed, ending an initial rally sparked by strong job growth.
The Institute for Supply Management (ISM) said its non-manufacturing PMI fell to 50.3 last month from 51.9 in April. A reading above 50 indicates growth in the service industry, which accounts for more than two-thirds of the economy.
Economists polled by Reuters had expected the non-manufacturing PMI to rise to 52.2.
The data suggests that the more subtle signal from the jobs report “may have been caused by the uptick in the unemployment rate rather than the strong increase in payroll hiring,” Bill Adams, chief economist at Comerica (NYSE: Bank) said in a note.
Data on Friday showed job growth in the United States accelerated by 339,000 jobs in May, but a rise in the unemployment rate to a seven-month high of 3.7% indicates a smooth labor market.
The dollar rose after better-than-expected job gains reinforced expectations that the Federal Reserve may continue to raise interest rates as inflation continues to rise.
“Job gains continue to surprise meaningfully to the upside, and the job market remains very strong,” said Brian Daingerfield, head of G10 FX strategy at NatWest Markets in Stamford, Connecticut.
It fell to 104.00, down 0.13% on the day, after rising to 104.40. And it settles below the highest level in 11 weeks at 104.70, which it reached on May 31.
The euro last rose 0.07% to $1.0712, just above $1.0635 on May 31, the lowest since March 20.
The dollar fell 0.27% to 139.60 yen. It reached 140.93 on May 30, the highest level since November 23.
The US central bank is seen as likely to leave interest rates unchanged in June, but federal funds futures traders are pricing in the 65% chance of an increase of at least an additional 25 basis points by July, according to CME Group (NASDAQ: FedWatch Tool). .
Fed officials, including vice-presidential nominee Philip Jefferson, stressed that any decision by the Fed to keep its benchmark interest rate steady at an upcoming meeting should not be taken to mean that the US central bank is done tightening monetary policy.
“You can think of skipping as perhaps part of a slowing down of the tightening cycle rather than a temporary pause in the tightening cycle,” Dangerfield said.
Fed officials are now in a blackout period ahead of the June 13-14 meeting. May consumer price inflation data due on June 13 is the next major US economic release.
The dollar rose ahead of the Reserve Bank of Australia (RBA) announcement of its interest rate decision on Tuesday.
Wells Fargo (NYSE:) Analysts Erik Nelson and Jack Boswell on Monday recommended buying the Australian currency against the US dollar and British pound on the grounds that markets are underestimating the possibility of a rate hike.
“Market rates for the RBA look very low in our view, both directly and relative to their peers,” they said. “We expect the RBA to rise tomorrow and guide more, resulting in a ~25bp upgrade to the final interest rate pricing and a sharp rally in the Australian dollar.”
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Coin offer prices at 3:01 PM (1901 GMT)
Description RIC Last US Close Pct Change YTD Pct High Bid Low Bid
previous change
a class
Dollar Index 104.0000104.1500 -0.13% 0.493% +104.4000 +103.9300
EUR/USD 1.0712 USD 1.0708 + 0.07% + 0.00% + 1.0722 USD + 1.0675 USD
USD/JPY 139.6000 139.9800 -0.27% +6.48% +140.4450 +139.2500
EUR/JPY 149.53 149.87 -0.23% +6.59% +150.1900 +149.2400
USD/CHF 0.9057 0.9090 -0.37% -2.06% +0.9119 +0.9053
GBP/USD $1.2432 $1.2450 -0.12% + 2.82% + $1.2447 + $1.2370
USD/CAD 1.3437 1.3435 +0.03% -0.82% +1.3461 +1.3418
AUD/USD 0.6616 USD 0.6605 +0.16% -2.95% + 0.6637 USD + 0.6580 USD
EUR/CHF 0.9700 0.9732 -0.33% -1.97% +0.9751 +0.9697
EUR/GBP 0.8615 0.8598 +0.20% -2.59% +0.8636 +0.8598
0.6072 NZD 0.6057 NZD +0.30% -4.32% + 0.6085 NZD + 0.6044 NZD
dollars / dollars
Dollar / Norway 11.0350 11.0260 +0.05% +12.40% +11.0990 +11.0170
Euro / Norway 11.8190 11.7854 +0.29% +12.68% +11.8540 +11.7520
Dollar / Sweden 10.8544 10.7884 +0.64% +4.29% +10.9171 +10.7986
Euro / Sweden 11.6293 11.5548 +0.64% +4.30% +11.6585 +11.5707