USD: Sharp drop in ISM non-manufacturing survey triggers short squeeze – MUFG

By FXStreet Lee Hardman, Currency Analyst at MUFG, notes that the US dollar has weakened sharply following the release yesterday of the much weaker than expected ISM non-manufacturing survey.

Key Quotes

“The weaker US dollar has triggered a relief rally in commodity prices and related currencies. The ISM survey revealed that business confidence in the service sector declined by 2.3 point to 53.5 in January reaching its lowest level since February 2014. In contrast the survey averaged 57.2 last year highlighting that business confidence has deteriorated markedly in recent months.

The survey has heightened concerns that domestic demand is now beginning to soften more materially alongside weak external demand. The US economy appears to have lost further growth momentum early this year extending the slowdown which started in the second half of last year.

The composite ISM survey is consistent with more modest growth. The employment sub-component declined sharply as well by 4.2 point to 52.1 in January increasing downside risks ahead of the release later this week of the latest non-farm payrolls report. The employment sub-component dropped by a similar amount in January of last year but weakness proved short lived and a misleading signal for employment growth.

It …read more

Source:: FX Street