US ISM Services PMI (August)

What it means

The ISM Services PMI surveys purchasing managers to gauge activity in the US services sector, which makes up roughly 70% of the economy. A reading above 50 signals expansion, below 50 signals contraction. August's 55.4 rose from July's 54.1, beat the 54.3 consensus, and marked the 26th straight month of expansion. Underneath the headline, Business Activity jumped to 61.7 and New Orders to 60.9 (both multi-year highs), while the Employment subindex stayed in contraction at 47.8 and Prices Paid climbed to 72.6, a sign of persistent inflation pressure.

What it moves

A 'hot' print like this complicates the path to further Fed rate cuts: accelerating services activity alongside rising input prices gives the Fed reason to stay cautious. Expect the dollar and Treasury yields to firm up, while gold and equities could face downward pressure as markets scale back bets on imminent rate cuts despite the strong growth headline.

Affected markets

• US Dollar ↑ — Stronger-than-expected services growth plus rising input prices reduce the odds of near-term Fed rate cuts, supporting the dollar.
• US Treasury yields ↑ — Hot activity and prices-paid readings push traders to price in a slower pace of Fed easing, lifting yields.
• US equities ↓ — Fewer expected rate cuts and renewed inflation pressure from the prices-paid subindex weigh on risk appetite, even though the headline signals a resilient economy.
• Gold ↓ — A stronger dollar and higher real yields make non-yielding gold less attractive.