- The S&P Global Preliminary Manufacturing PMI for August is expected to improve and the Services PMI to stabilize.
- Any deviation from expectations in the US PMI data could affect the dollar and the Fed’s monetary policy outlook.
- EUR/USD is trading below 1.0900 awaiting the release of US PMI data and the Jackson Hole symposium.
Business activity in the United States (US) private sector, as measured by the S&P Global Purchasing Managers’ Index (PMI) via a monthly survey, will see the release of August PMI flash estimates Manufacturing and Services PMI on Wednesday.
Ahead of the release of the US PMIs for August, markets expect the US Federal Reserve (Fed) to maintain rates next month, but remain leery about the future path of monetary policy, amid an increase of expectations that the Fed will keep rates higher for longer.
In its July survey, S&P Global said its flash US manufacturing PMI rose for the first time in three months to 49.0 since falling to a reading of 46.3 seen in June. The services PMI index, however, fell to 52.0 in July, from 53.2 in June. The PMI readings suggest that the US economy grew at a slower pace early in the third quarter.
Commenting on the results of the July survey, Chris Williamson, Chief Economist at S&P Global Market Intelligence, said that “there were other encouraging signs in the survey, notably a notable improvement in business expectations for production next year. Therefore, companies anticipate that the current bad times will pass soon and, more importantly, they are hiring more staff.”
“Good for inflation. The combination of weak demand and improving supply created a new ‘buyer’s market’ for many goods. As a result, goods prices rose for only a third month in a row, which should help contain consumer price inflation in the near term,” Williamson added.
What to expect from the next S&P Global PMI report?
For August, the S&P Global Manufacturing PMI is likely to continue to improve to 49.3. However, the services PMI is expected to fall to 52.2 in the reporting month, from 52.3 in July. The composite PMI would remain unchanged at 52.0 in August.
Analysts at BBH Markets noted that “the main PMI figures for August will be reported.” S&P Global reports preliminary PMIs on Wednesday. Manufacturing is expected to hold steady at 49.0, the services sector is expected to fall three points to 52.0 and the composite index is expected to fall half a point to 51.5. If so, this composite would be the lowest since February.”
When will the August Preliminary S&P Global PMI be released and how could it affect EUR/USD?
The release of the S&P Global PMI report is scheduled for 13:45 GMT on August 23. The Dollar is in a corrective move lower from two-month highs against its major counterparts, awaiting US data for further directional momentum. Meanwhile, the EUR/USD pair is reversing its recovery gains below the 1.0850 level.
If the US PMI report surprises positively across all indicators, it will help strengthen the high rate narrative for longer, pushing back expectations of Fed rate cuts in early 2024. Markets are pricing around 25 % probability of one more rate hike by the Fed in the last quarter of this year. Upbeat US data could add to signs of economic resilience, providing fresh impetus for the US dollar. EUR/USD could come under further selling pressure and retest the 1.0800 support zone.
Should US business activity disappoint, the dollar could extend its correction as the potential slowdown could warrant a Fed pause. A cooling in economic activity would be appreciated by Fed policymakers as it would help smooth even more inflation. Although fears of a “hard landing” could limit falls in the safe-haven dollar.
Offering a brief technical outlook for the EUR/USD pair, Dhwani Mehta, Chief Analyst for the Asian Session at FXStreet, writes: “The currency pair has oscillated between the flat 100-day SMA and the 200 SMA bullish since mid-August Will US data help EUR/USD yield range breakout As 14-day Relative Strength Index (RSI) remains below line average, downside risks remain intact for the pair.”
Dhwani also outlines the important technical levels for trading the EUR/USD pair: “The 100-day SMA at 1.0928 lines up at strong resistance, above which the downtrending 21-day SMA at 1.0950 will be challenged. Higher up, bulls The Euro will target the 50 SMA horizontal at 1.0982.On the other hand, immediate support awaits at the round level of 1.0800, where the 200-day SMA is located.An acceptance below the latter could trigger a new bearish trend towards the 200-day SMA. June 12 low at 1.0733″.
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
