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- The dollar held at two-month highs versus the yen early on Thursday, having risen against some currencies on new data supporting the case for a hike in U.S. interest rates next month. Dollar bulls took heart after the Institute for Supply Management’s services sector index jumped to 60.3 last month, the highest reading since August 2005. The upbeat report helped offset a slowdown in U.S. private job growth and comments from Fed Governor Jerome Powell. Powell said Fed policymakers have not yet decided whether to raise interest rates next month, in contrast to more hawkish comments from Atlanta Fed President Dennis Lockhart.
- U.S. private job growth slowed in July, but a surge in services industry activity to a near-decade high suggested solid economic momentum that strengthens the case for a Federal Reserve interest rate hike this year. The firm domestic fundamentals were underscored by another report on Wednesday showing an increase in imports of food, automobiles, industrial supplies and consumer goods in June. The Institute for Supply Management said its services sector index jumped to 60.3 last month, the highest reading since August 2005, from 56 in June. A reading above 50 indicates expansion in the services sector, which accounts for more than a third of the U.S. economy. The ISM survey, however, likely overstates the services sector expansion. Another survey from data firm Markit showed the sector growing moderately in July. Still, the services sector is helping to offset the drag on the economy from weak manufacturing. The jump in service sector employment in July also eased concerns on Wednesday of a sharp slowdown in job growth after the ADP National Employment Report showed private employers hired only 185,000 workers last month. Economists had expected a gain of 215,000.
- According to a Reuters survey of economists, nonfarm payrolls likely increased 223,000 last month, matching June’s job gains. Job cuts in the energy sector in the aftermath of the sharp drop in crude oil prices have take some edge off the labor market in recent months. The Fed has kept its short-term interest rate near zero since December 2008. A report last week showing wage growth stalled in the second quarter cast doubt that the U.S. central bank would hike rates at its September policy meeting. In a separate report on Wednesday, the Commerce Department said the U.S. trade deficit increased 7.1 percent to $43.8 billion in June. But May’s trade gap was revised down by $1 billion to $40.9 billion, leading economists to expect that the second-quarter gross domestic product estimate would be revised up from the 2.3 percent annual pace the government reported last week. May construction and factory inventory data released this week also have suggested second-quarter growth could be revised to at least a 3 percent annual rate when the government publishes its second GDP estimate later this month. June’s trade deficit was driven by a 1.2 percent rise in imports, as domestic demand grew solidly in the second quarter. The dollar, which has gained 15 percent against the currencies of the United States’ main trading partners since June 2014, is also making imports cheaper.
- Oil hovered near multi-month lows on Thursday with Brent under $50 a barrel after investors sold crude on worries about rising U.S. gasoline inventories as peak summer demand comes to an end. Gasoline stocks in the United States rose more than expected, overriding a bullish picture from a larger-than-expected drop in crude stockpiles and pushing prices down overnight to multi-month lows.