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    Deutsche Bank analysts note a rise in the ISM services index and inflation indicators

    by VT Markets
    /
    Feb 5, 2026
    The ISM services index rose to 53.8, reaching its highest level since late 2024. The prices paid component also climbed to 66.6, hinting at possible inflationary pressure in the US. The ADP private payrolls report came in weaker than expected, showing only 22,000 jobs added instead of the 45,000 anticipated. Despite this, Treasury yields increased slightly, with 10-year yields reaching 4.28%.

    Dollar Index Movement

    The Dollar Index moved up to the 97.80 range, indicating a positive US economic outlook. Treasury yields varied: the 2-year yield fell by 1.6 basis points, while the 10-year and 30-year yields rose by 1.0 and 2.3 basis points, respectively. Looking back to early 2025, the market faced mixed signals. While the ISM services index was high, the ADP payrolls report surprised many with its weakness. This scenario created a volatile environment for interest rates. The high prices paid component from January 2025 served as a clear warning sign, as core inflation stayed above 4% for most of last year. Now, we’re seeing some relief, with data from late 2025 showing inflation pressures easing. For instance, the latest Core PCE reading for December 2025 came in at 3.4%, down from its mid-year highs.

    Market Shifts and Strategies

    Back in early 2025, the Dollar Index hit 97.80 and peaked above 101 later that year as the Federal Reserve kept rates steady. However, the situation has changed. The index is now around 95.50, as the market anticipates policy easing. CME FedWatch futures show over a 70% chance of a rate cut by the June 2026 FOMC meeting. This scenario suggests preparing for a weaker dollar and lower long-term interest rates in the coming weeks. Options strategies, like buying puts on the Dollar Index or call options on Treasury bond futures, could be effective. Implied volatility in interest rate markets has increased, so traders should be cautious about the costs of these positions. Create your live VT Markets account and start trading now.

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