Services Sector Beat Gives Dollar a Boost

The dollar got a boost Wednesday from a much better-than-expected improvement in the services sector of the U.S. as well as a rebound in U.S. equities that drove USD/JPY through 104.46 resistance and giving the dollar a modest gain of 0.30% at Wednesday’s North American close.

The purchasing managers preliminary services sector index for October jumped to 54.8 from 52.3 in September, beating expectations to remain unchanged. Additionally, new home sales increased by 3.1% to 593K, but the unexpected gain was attributed to a sharp downward revision to August from 609K units to 575K units. Home sales were expected to decline by 1.3%.

The other major currencies were all stronger against the dollar despite an earlier uptick in the Dow that corresponded with a rebound in oil futures. EUR/USD raced up to 1.0950 soon after the U.S. open and then retreated back to the June 24 low of 1.0904 on the combination of dollar-friendly U.S. economic data and corresponding dollar gains in the USD/JPY pair. However, 1.0900/1.0904 support remained intact, keeping the euro’s modest gains intact. EUR/USD closed fractionally higher at 1.0908.