NEW YORK: The dollar rose against the pound and the yen on Monday after data showed that US services industry activity unexpectedly picked up in November, prompting speculation the Federal Reserve may not be able to pivot to slower rate rises imminently.
The Institute for Supply Management (ISM) said its non-manufacturing PMI increased to 56.5 last month from 54.4 in October, indicating that the services sector, which accounts for more than two-thirds of US economic activity, remained resilient in the face of rising interest rates. Economists polled by Reuters had forecast the non-manufacturing PMI would slip to 53.1.
The survey followed on the heels of data last Friday showing stronger-than-expected US job and wage growth in November. Consumer spending also accelerated in October.
The string of upbeat reports have raised optimism that a recession could be avoided in 2023, with growth just slowing sharply, while also spurring speculation about how high rates will rise.
“The market is just conjecturing about how aggressive the Fed needs to be to vanquish inflation,” said Joe Manimbo, senior market analyst at Convera.
Fed Chair Jerome Powell said last week the US central bank could scale back the pace of its rate increases “as soon as December.” The dollar climbed 1.35% against the yen to 136.15, bouncing from Friday’s three-and-a-half month low of 133.62, while sterling, which hit a more than five month top of $1.2345 in Asian trade Monday, was down 0.63% at $1.2215 at 10:45 EST (1345 GMT).
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