The Bloomberg Dollar Spot Index saw a modest increase, navigating a volatile trading session as investors processed a batch of mixed U.S. economic data concerning service sector activity and private payrolls. The index climbed 0.1%, following a day of fluctuating gains and losses during both London and New York trading hours. The Institute for Supply Management's services index registered at 54.4, surpassing the estimate of 52.2, while ADP private payrolls increased by 41,000, falling short of the projected 50,000 gain. "The ISM services index still points to solid service sector activity, but easing price pressures should encourage the Fed to maintain a dovish stance," said Elias Haddad, Global Market Strategist at Brown Brothers Harriman. The U.S. December employment report is scheduled for release on Friday, with market forecasts anticipating an addition of 70,000 non-farm payrolls. The yield on the 10-year U.S. Treasury note fell approximately 3.5 basis points to 4.14%, while U.S. stock markets showed a mixed performance.
The USD/JPY pair advanced less than 0.1% to 156.74. The EUR/USD pair held steady at 1.1682, while GBP/USD declined 0.3% to 1.3465. AUD/USD dropped 0.2% to 0.6728, following data indicating a slowdown in Australia's core inflation for November. According to data compiled by Bloomberg, markets have almost fully priced in the expectation for a first rate hike in May, a significant increase from the roughly 80% probability seen on Monday. "Softer overall data implies that investors will push back their expectations for the start of the tightening cycle," said David Forrester, Senior Strategist at Credit Agricole CIB. Additional insights were provided by forex traders familiar with the transactions who requested anonymity as they were not authorized to speak publicly.
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