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Dollar Trickles Lower Shrugging Off Upbeat U.S. Services Activity

11/6/2018, 10:41:36 AMBasics of Trading
Dollar Trickles Lower Shrugging Off Upbeat U.S. Services Activity

The dollar deepened its retreat against its rivals Monday shrugging off better-than-expected U.S. services activity as focus shifted to the U.S. midterm elections this week that could spring a bout of volatility across global markets.

The U.S. dollar index, which measures the greenback against a trade-weighted basket of six major currencies, fell by 0.24% to 96.31.

ISM nonmanufacturing data for October showed a reading of 60.3, below the record-setting reading seen last month, but still above expectations.

The services sector is critical component of the US economy, accounting for roughly 80% of U.S. private-sector gross domestic product (GDP).

The upbeat data was overshadowed by expectations that the U.S. mid-term elections Tuesday, will result in divided Congress, with Democrats tipped to take control of the House.

The midterms and the Federal Reserve policy action later in the week "are significant enough in terms of event risk to keep investors sitting on their hands," said Shaun Osborne, chief FX strategist, at Scotia Capital.

A stronger pound also weighed on the dollar as analysts touted further room for upside in sterling following the Bank of England's hawkish remarks and the expansionary budget last week.

"While the Brexit debate may dominate price action, the hawkish content of last week's Bank of England inflation report and the expansionary budget could work as catalysts for additional sterling strength once markets are clearer on the potential Brexit outcome," Morgan Stanley said in a note to clients

GBP/USD rose 0.58% to $1.3044.

EUR/USD rose 0.22% to $1.1414, but gains were weighed down by an ongoing stand off between Italy and the European Union lawmakers over the country's budget proposals.

USD/JPY rose 0.03% to Y113.23, while USD/CAD fell 0.02% to C$1.3108 as falling oil prices helped the latter pairing stem losses.