US Dollar Index drops to near 110.00 on cheerful market mood, US NFP the next trigger

• The DXY is expected to surrender the immediate support of 110.00.
• Poor demand by the households is responsible for weak ISM Service PMI projections.
• This week, the US NFP data will keep the DXY on the tenterhooks.

The US dollar index (DXY) is displaying a lackluster performance after declining to near the psychological support of 110.00. The asset is oscillating in a narrow range of 110.05-110.28 in the Asian session and is expected to deliver more weakness ahead of the US Nonfarm Payrolls (NFP) data. But before that, investors will execute positions on US ISM Services PMI data. As investors have shrugged off the uncertainty of a global slowdown, risk-sensitive currencies are sky-rocketing. 

Poor demand is responsible for weak ISM Service PMI projections

As per the projections, the US ISM Services PMI data is seen lower at 56 vs. the previous reading of 56.9. Mounting price pressures in the US economy have titled the overall demand to the downside. The households are having less liquidity in their palms due to inflation-adjusted payouts, which has forced them to stick with demand for necessities only. Also, the New Orders Index data, which illustrates forward demand is expected to trim significantly to 58.9 against the prior release of 61.8.

US NFP, the critical trigger

This week, the release of the US NFP data will keep the DXY on the tenterhooks. The US NFP is seen lower at 250k vs. the prior release of 315k. While the Unemployment Rate is seen stabilizing at 3.7%.

Apart from that, investors will keenly focus on the Average Hourly Earnings data. As price pressures have not shifted significantly to the lower side, the earnings data holds meaningful importance. The labor cost index is seen lower by 10 basis points (bps) to 5.1% on an annual basis. Due to higher inflation, households are forced to make higher payouts for the usual quantity purchased and lower earnings won’t help them to offset the extra inflation-led spending.