The dollar is on pace to climb for an eighth straight week, the longest streak since 2005. Traders are looking to services sector data for the gains to continue, with the greenback tending to climb when the report shows expansion and outperforms a slowing goods sector.
Services have outperformed the goods sector by a 2.5-point margin over at least six months four times over the past 10 years, and in each of those times the dollar has gained an average of 4%. The currency’s advances have ranged from a modest 1% this year through Tuesday to almost 8% in the period ending November 2016 before peaking.
“This resilience, whether looking at jobs growth, sticky inflation or consumer spending, is predominantly driven by services,” Adarsh Sinha, Bank of America’s co-head of Asia FX and Rates Strategy, said in a weekly outlook. While the bank remains bullish ahead of the ISM Services Index report on Wednesday, “in our view, a meaningful slowdown in the service sector is necessary if not sufficient for sustained USD depreciation.
Strategists at the bank say 80% of dollar appreciation since the beginning of 2022 can be attributed to either the Fed’s policy relative to the rest of the world or China.How well the services sector is performing also has implications outside the US. Cracks are showing up in China, Europe, Australia and the UK, a trend that is shifting the outlook for policy and weighing on their respective currencies.
France Dernières Nouvelles, France Actualités
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