Lee Hardman, Currency Analyst at MUFG, notes that the US dollar has weakened modestly following the release yesterday of the much weaker than expected US services PMI survey for February. Key Quotes “The survey revealed the business confidence in the services sector continued to decline sharply by 3.4 point to 49.8 in February reaching its lowest level since October 2013. It brings the cumulative decline in the services PMI to 6.3 point since November of last year. The survey will reinforce investor concerns that domestic demand is beginning to slow more materially as tighter financial conditions undermine growth. It increases downside risks for the release next week of the ISM non-manufacturing survey for February. If weakness was also echoed in the ISM non-manufacturing survey it would be more concerning. The services PMI survey has been much more volatile than the ISM non-manufacturing survey in recent years which suggests treating the acute weakness signalled in the PMI survey with some caution. It was also encouraging that the employment sub-component within the PMI survey remained more stable at 54.2 which is consistent with another solid payrolls report for February. More timely indicators of labour market conditions such as initial claims have also displayed no signs of weakness remaining close to cyclical lows, which would normally be evident by now if weakness in the services sector was acute as signalled by the PMI survey.” For more information, read our latest forex news.