The US dollar moved higher during the US session after the preliminary US services PMI came in better than the market had been expecting.
The Services PMI in the United States increased to 53.70 points in April from 52.60 points in March of 2023. The strong number increased the chances of the Fed raising rates at the next policy meeting.
Breaking down numbers Manufacturing came in at 50.4 vs 49.0 expected, with the prior manufacturing reading at 49.2. The services rate of inflation increased at a sharper pace, while Services business confidence was the 2nd highest in a year.
The Markit US Services PMI is closely watched by the Fed and is based on data collected from a representative panel of over 400 private sector companies covering transport and communication, financial intermediaries, business and personal services, computing & IT and hotels and restaurants.
The index tracks variables such as sales, employment, inventories, and prices. A reading above 50 indicates that the services sector is generally expanding; below 50 indicates that it is declining.
Commenting on the US flash PMI data, Chris Williamson, Chief Business Economist at S&P Global Market Intelligence said: “Growth is also reassuringly broad-based, led by services thanks to a post-pandemic shift in spending away from goods, though goods producers are also reporting signs of demand picking up again.”
He added that “Jobs growth has accelerated alongside the resurgence of demand, aided by reports of vacancies being more easily filled, reflecting improved supply of candidates and higher wages.”
And “This increase helps explain why core inflation has proven stubbornly elevated at 5.6% and points to a possible upturn – or at least some stickiness – in consumer price inflation.”