U.S. Services-Sector Activity Expands Again in October
The U.S. services-sector PMI rose slightly to 54.5 in October, reflecting sustained expansion despite a slowdown from September's 54.9. Economists had expected a marginal uptick to 54.8, indicating a stronger-than-predicted resilience in service activity. This stability may uphold the Federal Reserve's cautious approach toward further rate adjustments, particularly as monetary policy remains a focal point in light of recent inflation data.
Where it sits in our coverage
Our consensus EUR/USD target sits at 1.075 (median across 8 firms), with Goldman at the upper bound (1.12) and BofA at the lower (1.04). This latest services PMI result supports a cautious sentiment toward dollar strength, as the economy continues to show mixed signals.
How firms align
Goldman aligns with the bullish sentiment indicated by the services expansion, maintaining a target of 1.12. In contrast, BofA suggests a more bearish outlook, with their target resting at 1.04 due to concerns over economic conditions defined by the PMI readings. Both firms provide distinct views, influencing our ongoing assessment of U.S. dollar dynamics.
What the data shows
The services PMI readings suggest resilience in the economy, aligning with the recent forecast revisions that indicate a stable growth trajectory. Insights from our latest research highlight potential volatility in the USD as we approach Q4 inflation data, informing trader strategies: /research/volatilityinsights.
How firms align with this view
Aligned with the headline view
Contrary positioning
Key takeaways
- 01U.S. services sector activity holds steady at 54.5, indicating continued growth.
- 02Traders should note the Fed's reaction risk to ongoing service sector performance.
- 03Downside risk for the USD exists if sector activity shows signs of significant contraction.
- 04Persisting inflation could drive growth expectations and keep dollar bullish.
Market implications
Next week, watch for key inflation data releases that could impact the dollar’s direction against the Euro as we approach our consensus target of 1.075.
Risks to this view
Should the services sector show signs of contraction in upcoming reports, it could invalidate the current bullish sentiment towards the dollar, prompting a reevaluation of targets.
Sentiment by currency
USD+EUR~JPY~GBP~Composite USD score: +0.30
Sources & References
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