The U.S. non-manufacturing PMI for February surged to 56.1, exceeding the estimated 53.5 and the previous month's 53.8. Key components like business activity (59.9), new orders (58.6), and employment (51.8) showed expansion, while the backlog of orders hit 55.9, the highest since February 2025. Prices paid eased to 63.0, remaining above 60 for 15 consecutive months. The services sector has expanded for 20 straight months, with the index reaching its highest level since July 2022. Steve Miller of ISM highlighted robust growth in new export orders and trade uncertainty stabilizing. This data reinforces confidence in the U.S. economy, potentially influencing the Federal Reserve's rate decisions. A strong services sector supports the dollar, impacting forex markets and commodities like copper and gasoline. Traders may anticipate further Fed rate hikes, strengthening USD pairs like EUR/USD and USD/JPY. The expansion also signals resilience in consumer demand, which could drive equities in sectors like travel and hospitality. Looking ahead, investors should monitor upcoming U.S. employment data and inflation reports for clues on Fed policy. The persistent expansion in services, combined with stable trade costs, may sustain dollar strength. Gulf investors should assess how dollar volatility affects their portfolios, particularly in energy and USD-denominated assets. The backlog of orders and inventory growth also suggest potential supply chain adjustments to watch.
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