The euro (EUR) experienced a slight decline against the US dollar (USD) on Wednesday, remaining close to its three-month lows as the dollar continues to gain strength from positive US economic news.
As of now, the EUR/USD pair is around 1.1477, not showing much change even with a busy day for US economic reports. The US Dollar Index (DXY), which measures the dollar against a mix of six major currencies, is trading at approximately 100.30, marking its highest point since May 29.
According to the latest ADP employment report, private sector jobs in the US increased by 42,000 in October, which was above expectations and reversed a previous decline of 29,000 jobs in September.
On another note, the ISM Services Purchasing Managers’ Index (PMI) witnessed a significant increase in October, moving up to 52.4 from 50 in September. This indicates a return to growth in the services sector for the eighth time this year. The report also highlighted strong business activity (54.3) and new orders (56.2), but noted a rise in prices paid to 70, the highest in three years. However, the employment index showed signs of weakness, coming in at 48.2.
Earlier, the S&P Global US Services PMI increased to 54.8 in October from 54.2 in September, showing the sector is expanding for the 33rd month in a row. This report reflected solid demand and consistent job growth, although confidence dipped to a six-month low due to uncertainties around tariffs and government policies.
The data indicates the US economy is entering the fourth quarter with strong momentum, in line with GDP growth at around 2.5%, according to Chris Williamson, Chief Economist at S&P Global.
This combination of strong service sector activity and steady job growth seems to reinforce the Federal Reserve’s cautious stance following a 25 basis point (bps) interest rate cut last week. Currently, traders estimate there’s a 62% chance of another rate cut in December, down from 71% earlier today and from 94% just a week ago, based on the CME FedWatch tool.
