US ISM Services PMI eases to 53.6 in April
- ISM Services PMI recedes to 53.6 in April, missing consensus.
- The US Dollar trades slightly on the defensive on Tuesday.
Economic activity in the US service sector lost some momentum in April, with the ISM Services PMI easing to 53.6 from 54.0 in the previous month, coming in below analysts' expectations.
Further poll results found that the Prices Paid Index, a crucial barometer of inflation, held steady at 70.7, while the Employment Index rose to 48.0 from 45.2, indicating a modest improvement in labour market conditions in the service sector. Finally, the New Orders Index weakened to 53.5 from 60.6.
Market reaction
The Greenback navigates an inconclusive range following the release, with the US Dollar Index (DXY) alternating gains with losses in the 98.50-98.40 band.
GDP FAQs
A country’s Gross Domestic Product (GDP) measures the rate of growth of its economy over a given period of time, usually a quarter. The most reliable figures are those that compare GDP to the previous quarter e.g Q2 of 2023 vs Q1 of 2023, or to the same period in the previous year, e.g Q2 of 2023 vs Q2 of 2022. Annualized quarterly GDP figures extrapolate the growth rate of the quarter as if it were constant for the rest of the year. These can be misleading, however, if temporary shocks impact growth in one quarter but are unlikely to last all year – such as happened in the first quarter of 2020 at the outbreak of the covid pandemic, when growth plummeted.
A higher GDP result is generally positive for a nation’s currency as it reflects a growing economy, which is more likely to produce goods and services that can be exported, as well as attracting higher foreign investment. By the same token, when GDP falls it is usually negative for the currency. When an economy grows people tend to spend more, which leads to inflation. The country’s central bank then has to put up interest rates to combat the inflation with the side effect of attracting more capital inflows from global investors, thus helping the local currency appreciate.
When an economy grows and GDP is rising, people tend to spend more which leads to inflation. The country’s central bank then has to put up interest rates to combat the inflation. Higher interest rates are negative for Gold because they increase the opportunity-cost of holding Gold versus placing the money in a cash deposit account. Therefore, a higher GDP growth rate is usually a bearish factor for Gold price.
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