Trade Desk Thoughts - ISM Non-Manufacturing Composite (August)

ISM Non-Manufacturing Composite (August) Actual 50.8, Expected 49.4, Previous 49.5

Release Explanation: Similar to the PMI numbers, it surveys Purchase Managers on their sentiment on orders, hiring, inventories, and deliveries. Split into the Service Index (above), and then Service Prices which look at the rate of Inflation when materials and services are purchased. Builds an economic picture of the strength of Service activity ahead of official Government report. These numbers usually are a pre-cursor to the PMI numbers later in the month. A currency can be very reactive to these numbers as over time they have been a reliable read on Government reports to come.

Trade Desk Thoughts: The August report indicates the service sector expanded for the first time in three months. The Non-Manufacturing Business Activity Index increased 2 percentage points to 51.6 percent. The New Orders Index increased 1.8 percentage points to 49.7 percent, and the Employment Index decreased 1.7 percentage points to 45.4 percent. The Prices Index decreased 7.9 percentage points to 72.9 percent in August, indicating a slower rate in price increases than in July. According to the NMI, 10 non-manufacturing industries reported growth in August. Respondents' comments remain mixed about business conditions and reflect concern about the uncertainty of the economy.

"A welcome aspect of the report was the decline in prices," said Matthew Carniol, chief currency strategist at TheLFB-forex.com. "Of concern was that employment continues to weaken at a faster pace and that new export orders contracted at a faster pace. Taken together, with growth decelerations now expected to continue in Europe and parts of Asia, we may have a peak reading for this sector."

Forex Technical Reaction: The equity markets sold off strongly after the report, and were recently down nearly 1.8%. The dollar continues to lose ground to the yen as carry trade positions are closed, but the dollar has started to gain on the euro and pound.  

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