JABAR EKSPRES – The U.S. dollar weakened slightly against a basket of major peers in late trading Tuesday (6/6), as disappointing economic data in the United States strengthened the case for the Federal Reserve to hold interest rates steady at this month’s meeting.
The dollar index, which measures the greenback against six other major currencies, fell 0.01 percent to 103.9990 in late trade.
The US services purchasing managers’ index (PMI) in May fell to 50.3 from April’s 51.9, well below expectations of 52.2 and a step away from entering recession territory, according to data released by the Institute for Supply Management (ISM) on Monday morning.
The US dollar retracted all gains due to falling government bond yields, immediately after the data release.
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According to the report, the non-manufacturing sector was limited by a sharp decline in the forward-looking new orders component, which slipped to 52.9 from 56.1 in April. The employment indicator also saw a decline, retreating to 49.2 in May from 50.8 in the previous month, an indication that hiring conditions may be deteriorating.
With Federal Reserve officials now in a blackout period before the June 13-14 meeting, “financial markets are left to focus on the data alone, and today’s ISM survey reads very poorly,” said Adrian Ash, research director at BullionVault.
The U.S. central bank is seen as most likely to leave rates unchanged in June, but fed funds futures traders estimate a 65 percent probability of at least an additional 25 basis point rate hike in July, according to CME Group’s FedWatch Tool.
Fed officials including vice chair nominee Philip Jefferson have emphasized that any Fed decision to hold the benchmark rate steady at an upcoming meeting should not be taken to mean the US central bank is done tightening monetary policy.
In late New York trading, the euro rose to 1.0714 US dollars from 1.0713 US dollars in the previous session, and the British pound fell to 1.2433 US dollars from 1.2453 US dollars in the previous session.
