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The dollar was better bid today with USDJPY gapping higher on the week’s open in Asia as currency markets breathed a sigh of relief that the Flynn indictment may not have been as politically damaging to Donald Trump as initially reported. The passage of the tax cut bill by Senate was also viewed as bullish for US growth with benchmark 10-year yield popping to 2.40% in morning European dealing.
But tomorrow we get an insight into how well the US economy is doing. ISM Non-Manufacturing report covers more than 70% of the US economy and is the 2nd most important data point for investors after the NFPs.
The market is looking for a modest pullback on the headline, but the true interest of traders will the employment component which tends to be the single best forecaster of the job report and the price paid component which could an early hint that inflationary pressures are finally making their way through the economy.
If ISM beats to the upside it could unleash a rally in rates, and USDJPY could head towards 114.00 as all systems will signal go for US growth.