ISM Services: Another Trigger for Dollar Moves? Employment Data in Focus
Today, all eyes are on the ISM Services data, which could be a key driver of dollar moves, especially as it coincides with critical employment releases. With the service sector still a major pillar of the US economy, a print below 49.6 on the ISM Services index would likely indicate further economic slowing. This would come on the heels of recent soft labor market data and could increase the chances of more aggressive rate cuts from the Federal Reserve.
At the same time, we’re also getting updates on initial and continuing jobless claims. If initial claims come in higher than expected—above 238,000—and continuing claims exceed 1.899 million, this would add even more pressure on the Fed to act quickly. Such a scenario would point to broader labor market weakness, strengthening the case for a 50-basis point rate cut in September, which has already been priced in by short-term interest rate markets.
Beyond the headline ISM number, the employment component within the services data is equally crucial. If the employment index falls below 51.1, it would be another red flag signaling labor market cooling, reinforcing the overall narrative of a slowing economy. This, combined with weak jobless data, would likely cause the dollar to sell off sharply, especially if the ISM report confirms the weakening trend.
On the inflation front, the prices paid index is another critical component. If it comes in below 56.9, it could signal that inflationary pressures are easing, giving the Fed more room to cut rates without fearing a resurgence of inflation.
For traders, the combination of these economic indicators makes today a high-stakes event. A weaker-than-expected ISM print and soft labor data could send the dollar lower, benefiting currencies like the Euro and boosting risk assets like equities. However, a stronger ISM Services report—especially if the employment and prices paid components are robust—could strengthen the dollar, as it would signal that the US economy is more resilient than expected, potentially delaying aggressive Fed rate cuts.
Stay alert—today’s data releases could create significant volatility across markets, with the potential to reshape expectations for the dollar and broader market sentiment.