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ISM Services Orders Jump Reshapes Dollar Rate Path
Services new orders surged to 57.3 in May, complicating Fed rate-cut bets and widening the yield gap that drives EUR/USD lower.
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The ISM Services New Orders Index climbed to 57.3 in May from 53.5 in April, a four-point acceleration that shifts the rate narrative for the dollar. A reading above 50 signals expansion, and the jump from the prior month points to demand resilience that complicates the Federal Reserve's rate-cut timeline. Markets that had begun pricing in a September cut now face a data point that argues against early easing.
Demand Resilience and the Fed Rate Path
The subindex tracks the demand side of the services economy, which accounts for the bulk of US output and employment. A move of nearly four points in one month is not noise; it reflects orders placed across hospitality, finance, and business services. The 53.5 April print had already kept the sector in expansion territory. The May surge pushes the index to levels associated with above-trend growth. Stronger services demand supports pricing power and wage growth, two inputs that keep core services inflation sticky. The Fed's Beige Book and recent FOMC minutes have emphasised that the path to 2% inflation requires sustained softening in services. The 57.3 reading weakens the case for a near-term pivot. Higher real yields make the dollar more attractive on a carry basis, especially against currencies where central banks are closer to cutting or already have.