A collapse in the Thursday’s ISM services index triggered a large shift in US Dollar (USD) positioning, with the Greenback losing across the board, ING’s FX analyst Francesco Pesole notes.
“A closer look at the ISM print paints a concerning picture for US activity. The index fell to the lowest in four years (48.8), new orders plunged to 47.3 from 54.1, business activity collapsed to 49.6 from 61.2, and employment fell to 46.1 from 47.1. Combining the manufacturing and services, ISM employment points to a 175k drop in payrolls, as opposed to the expected 190k gain.”
“Market bets on Federal Reserve (Fed) easing did not rise dramatically, though. We suspect some of that reluctance to price in more easing is related to rising chances of Donald Trump winning the US. Thursday is also a US national holiday; financial markets are closed. It also means we may not get major updates on a possible Democratic candidate replacement.”
“All in all, we had expected the USD to weaken in the second half of the week on the back of US macro data, and after the ISM decline, we could see further USD softness tomorrow when the June jobs report is published. Rising bets on Trump and EU political risk can limit USD downside beyond the very short term, but the immediate impact of US data should remain significant for now.”
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