The Institute for Supply Management released their report on the non-manufacturing sector Tuesday morning, with the headline figure printing 54.7, up from last month’s reading of 52.6. Markets reacted positively to the report crossing the wires as investors fear the recent slowdown in manufacturing may be spilling over into the larger services sector as the counterpart ISM manufacturing reading is in its third month of contraction. USD/JPY pushed above the 109.00 mark on the release and Gold breached below 1490.00, a new monthly low.

USDJPY WITH GOLD (XAU/USD) PRICE CHART: 5 – MINUTE TIME FRAME (OCT 3)

(Click on image to enlarge)

The beat this morning in the services side of the economy is helping lift concerns about a spillover from the manufacturing sector which is now in its third month of contraction according to the counterpart ISM manufacturing sector. While trade wars do not seem to be impacting the services side to the extent of manufacturing there still is concern among survey participants with one respondent stating “Current outlooks for commodities, equipment, and materials indicate purchasing now has leverage. Investment is still hampered by uncertainties in trade, global economic environment, manufacturing and the like.”

ISM SERVICES, NON-MANUFACTURING PMI VS S&P 500 INDEX

(Click on image to enlarge)

While markets continue to push higher, buoyed further by this morning's data, traders remain focused on trade war headlines, with positive rhetoric crossing the wires yesterday showing the US is considering the removal of some tariffs. Easing monetary conditions have also helped spur optimism as the Fed has not cut three times this year, however, markets are now pricing only a 9% chance for a 4th rate cut this year, evidenced by Fed Fund Futures.

FOMC RATE CUT EXPECTATIONS (DECEMBER 2019)

(Click on image to enlarge)