The Institute for Supply Management released their report on the services sector Wednesday morning, with the headline figure printing 53.9 for November, down from last month’s reading of 54.7. Equity markets remain largely focused on US-China trade headlines and were unchanged as the report crossed the wires. However, the USD did briefly drop on the report but recovered quickly and gained ground following the report's release. The US Dollar did see noticeable weakness against the Canadian Dollar as the Bank of Canada’s interest rate decision was released at the same time, with the BOC keeping rates unchanged.

DXY INDEX (5-MIN CHART)

(Click on image to enlarge)

The miss Wednesday morning in the services side of the economy is bolstering ongoing concerns of a spillover from the manufacturing sector which is now in its fourth month of contraction according to the counterpart ISM manufacturing sector index, despite durable goods orders strongly bouncing back in October, prompting speculation of recovery in the index. Still, the services sector remains above the 50.0 mark, indicating expansion, however, the trend over the past year is negative and edges closer to contractionary territory.

(Click on image to enlarge)

While concerns surrounding the health of the US economy continue, the weakening in the services side of the economy is notable. When viewed together with the contraction in manufacturing, the expectations for growth going forward shift to a more pessimistic outlook. Downgrades to global growth for 2019 and 2020 continue to accelerate recessionary fears in the market, even as the recent lull in trade tensions saw US equity markets hit record highs. The Atlanta Fed GDPNow forecast for Q4,2019 was lowered to 1.3% on Monday, down from 1.7% last month.

(Click on image to enlarge)

Even as recessionary fears grip global market participants, the Federal Reserve has moved into a more hawkish stance over the month after three rate cuts this year. The Fed now appears to be waiting to view the impacts of these rates cuts as they expect a recovery in economic conditions. These expectations are reflected in the market as the yield curve spread between the 3-month and 10-year treasury yield moved out of inversion territory and has now steepened above 20%.