• US ISM Services PMI rose more than expected in May.
• US Dollar Index edges higher toward 104.50 after the data.

Business activity in the US service sector expanded in May, with the ISM Services PMI recovering to 53.8 from 49.4 in April. This reading came in above the market expectation of 50.8. 

Other details of the report showed that the Prices Paid Index, the inflation component, edged lower to 58.1 from 59.2, while the Employment Index recovered to 47.1 from 45.9.

Assessing the survey's findings, "the increase in the composite index in May is a result of notably higher business activity, faster new orders growth, slower supplier deliveries and despite the continued contraction in employment," said Anthony Nieves, Chair of the Institute for Supply Management Services Business Survey Committee, and continued:

"Survey respondents indicated that overall business is increasing, with growth rates continuing to vary by company and industry. Employment challenges remain, primarily attributed to difficulties in backfilling positions and controlling labor expenses. The majority of respondents indicate that inflation and the current interest rates are an impediment to improving business conditions."

Market reaction

The US Dollar Index recovered from session lows following the upbeat PMI data and was last seen rising 0.2% on the day at 104.35.