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US dollar treading water ahead of service PMI

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US dollar treading water ahead of service PMI

The US dollar opened the week in neutral territory ahead of key services data courtesy of Markit Group and the Institute for Supply Management.

The US dollar index, a weighted average of the US dollar’s performance versus six major peers, lost 0.2 percent last week. In the morning session the index was at 79.49, relatively unchanged from its previous close. The greenback is expected to face more action later in the day with the release of the purchasing managers index.

The US service economy expanded at a strong pace in April, according to market forecasts. Last week Markit and ISM said the US manufacturing economy expanded sharply in April, although Markit’s report highlighted soft export demand and subdued hiring relative to the previous two months.

Economists polled by Bloomberg say ISM’s gauge of service activity rose 1.1 percentage points to 54.2 in April. The consensus range was 53 to 55.

The greenback was unable to rally last week as the Federal Reserve pared asset purchases for the fourth time in as many months and the US labour market registered its sharpest pace of job creation in more than two years. The US economy generated 288,000 new jobs last month, following an upwardly revised gain of 203,000 in March, the Labor Department reported.

Federal Reserve Chair Janet Yellen will testify to lawmakers Wednesday amid speculation the central bank will keep interest rates at record lows for the foreseeable future. The Federal Open Market Committee agreed unanimously last week to reign in record stimulus by another $10 billion.

The EURUSD was unchanged in the morning session following the release of the Sentix investor confidence index. The monthly indicator, which gauges institutional investor sentiment in the Eurozone, declined from 14.1 to 12.8. Meanwhile, producer inflation in the Eurozone declined slower than forecast, according to the European Commission. The producer price index declined 1.6 percent in March versus estimates of a 1.7 percent decline.

The GBPUSD retreated further below the 1.69 level, falling more than 0.1 percent to 1.6858. The pair soared to a new five-year high last week following four consecutive days of advances. The Office for National Statistics will report on industrial and manufacturing production later in the week, and the Bank of England will announce its latest rate decision.

The USDJPY declined more than 0.3 percent, falling below the 102 level after Bank of Japan Governor Haruhiko Kuroda said in an interview on CNBC that the country’s recovery is on track. Kuroda’s comments entail the central bank is not inclined to expand on its current stimulus program.

The US dollar was trading higher versus its northern rival, the loonie, which faces an active week. The USDCAD pair climbed 0.1 percent to 1.0985. Statistics Canada will report on international trade on Tuesday. The Richard Ivey School of Business, one of Canada’s top business schools, will release its monthly purchasing managers index on the same day. The index is expected to show sharp expansion in Canadian business activity last month.

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