• US S&P Global Manufacturing PMI dropped below 50 in May.
• US Dollar Index clings to modest daily gains near 103.50.

The business activity in the US private sector expanded at a strengthening pace in early May with the S&P Global's Composite PMI rising to 54.5 from 53.4 in April.

In the same period, S&P Global Manufacturing PMI declined to 48.5 from 50.2, revealing a contraction in the manufacturing sector's activity. On the other hand, the Services PMI rose to 55.1 from 53.6, surpassing the market expectation of 52.6.

Commenting on the data, “the US economic expansion gathered further momentum in May, but an increasing dichotomy is evident," said Chris Williamson, Chief Business Economist at S&P Global Market Intelligence."

"While service sector companies are enjoying a surge in post-pandemic demand, especially for travel and leisure, manufacturers are struggling with over-filled warehouses and a dearth of new orders as spending is diverted from goods to services," Williamson added. “Jobs growth has accelerated as service providers companies seek to meet demand, but this tightening labour market amid strong demand will be a concern as a fuel of further inflationary pressures.”

Market reaction

These data don't seem to be having a noticeable impact on the US Dollar's performance against its major rivals. As of writing, the US Dollar Index was up 0.25% on the day at 103.50.