U.S services sector PMI expands more than expected in December

U.S services sector PMI expands more than expected in December
Written by:
Michael Harris
7th January, 18:17
Updated: 11th March, 09:13
  • ISM reports U.S December's services PMI at 55.0 against analysts' estimate of 54.5.
  • Economists cite the rising optimism regarding the U.S-China trade war for improved services PMI.
  • Business activity in the serivces sector rose 5.6 points to 57.2 in December.
  • EUR/USD dropped from around 1.1180 to as low as 1.1115 following the economic data.

The Institute of Supply Management (ISM) announced the U.S non-manufacturing purchasing managers’ index (PMI) on Tuesday. Beating the analysts’ estimate, the economic data turned out to be a major market mover for the day.

As per the data, the services sector activity rose marginally in the United States in December. Much of the improvement was attributed to the rising optimism regarding the U.S – China trade war that is likely to see an end to the tit-for-tat tariffs on each other’s goods.

ISM Reveals U.S December’s Non-Manufacturing PMI At 55.0

The Institute of Supply Management revealed the services PMI to have risen to 55 in December. The figure was capped at a slightly lower 53.9 in November. In a previous estimate, economists had estimated a small increase to 54.3 for the index in December. Beating the analysts’ forecast and printing higher than the last month, the economic data fueled the U.S dollar index that saw a sharp drop in the EUR/USD currency pair.

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The data, however, came contrary to December’s manufacturing PMI that ISM announced at its worst in over a decade last week. According to ISM’s chair, Anthony Nieves:

“The respondents are positive about the potential resolution on tariffs. However, respondents continue to have difficulty with labor resources.”

Tuesday’s data further highlighted the prices in the services sector to have remained unchanged as compared to that of November. Employment, on the other hand, was slightly hit in December as it marginally dropped when compared to the figure for November. This was, however, offset by a significant improvement of 5.6 points in business activity. The business activity sub-index for the services sector rose to 57.2 in December.

U.S And China Are Expected To Sign The Phase 1 Trade Deal On January 15th

The two largest economies of the world, the United States of American and China, are likely to officialize the phase 1 trade deal on January 15th when it is likely to be signed at the White House. Following the ceremony, economic indicators are likely to improve further, as per the analysts.

EUR/USD responded aggressively to the economic data on Tuesday. EUR/USD continued to challenge the psychological 1.12 level in the early session on Tuesday. Following the release of data, however, the currency pair was seen dropped from around 1.1180 level. The pair was last seen trading at 1.1115 on Tuesday.

The U.S dollar index, on the other hand, caught steam and was fueled to as high as 96.78 following the release of data.

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