ISM Non-manufacturing Index (Jan) Actual 42.9, Expected 39.1, Previous 40.1 (Revised from 40.6)

Release Explanation: Similar to the PMI numbers, it surveys Purchase Managers on their sentiment on orders, hiring, inventories, and deliveries. Split into the Service Index (above), and then Service Prices which look at the rate of Inflation when materials and services are purchased. Builds an economic picture of the strength of manufacturing activity ahead of official Government reports. These numbers usually are a pre-cursor to the PMI numbers later in the month. A currency can be very reactive to these numbers as over time they have been a reliable read on Government reports to come.

Trade Desk Thoughts: The service sector of the economy contracted for a fourth month in a row in January, according to today's report from the Institute of Supply Management, but the pace of contraction slowed for a second straight month.

The NMI (Non-Manufacturing Index) was 42.9% in January, 2.8 percentage points higher than the seasonally adjusted 40.1% from in December.

Of the 18 sub-sectors within non-manufacturing, only 2 registered growth in January; Health Care & Social Assistance along with Finance & Insurance.

Among the sub-indexes, the ISM noted that employment, now in its ninth month of contraction, and exports, which has now contracted for three months, both did so at a faster pace in January. Production, prices and imports contracted at a slower pace. And as a sign that production is catching up with reduced demand, inventories contracted at a faster pace.

The inventory number is especially important, said Matthew Carniol, chief currency strategist at The numbers imply that the pace of employment declines could slow.

Respondents in the Arts, Entertainment & Recreation sectors said business continued to decline, while others continued to note that credit availability remained an issue. Respondents from the Finance & Insurance sectors said that markets were showing signs of stabilizing.

Forex Technical Reaction: Stocks reached their high of the day after the report, recently trading up 1.7%. The dollar is heading lower against the higher-yielding currencies but is holding steady against the yen.