US Service PMI Rises to 12 Year High

U.S. services sector activity raced to a near 12-1/2-year high in January, buoyed by robust growth in new orders, the latest sign of strong momentum in the economy at the start of the year.

Economic growth is showing strength even before the stimulus from a $1.5 trillion tax cut package, which came into effect last month, has started to filter through. That is causing concern that the economy could overheat.

The yield on the benchmark 10-year Treasury note has risen to a four-year high as investors anticipate a slightly faster pace of interest rate increases from the Federal Reserve than has been expected.

The U.S. central bank has forecast three rate increases this year after raising borrowing costs three times in 2017. The Institute for Supply Management’s (ISM) survey on Monday added to a report on Friday showing a pickup in job gains in January and the strongest annual wage growth in more than 8-1/2 years.

“All of this is before the actual effects of the tax cuts have had time to kick in,” said John Ryding, chief economist at RDQ Economics in New York. “The combination of strong employment growth and rising cost pressures will keep the Fed on course for a rate hike in March and we continue to believe the Fed will hike four times in 2018.”

via Reuters

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza