■S&P Global preliminary PMIs are expected to confirm ongoing expansion in the US private sector’s business activity in June.
■Survey details on inflation and employment will be scrutinized by market participants.
■EUR/USD needs to clear 1.0790-1.0800 to attract buyers.
S&P Global will issue flash estimates of the United States (US) Purchasing Managers Indexes (PMIs) for June, a monthly survey of business activity, on Friday. The survey is expected to show that the economic activity in the private sector continued to expand at a moderate pace.
In May, S&P Global Composite PMI improved to 54.5 from 51.3 in April. The Manufacturing PMI edged higher to 51.3 from 50.0, while the Services PMI climbed to 54.8 from 51.3. Assessing the survey’s findings, “the US economic upturn has accelerated again after two months of slower growth, with the early PMI data signaling the fastest expansion for just over two years in May,” Chris Williamson, Chief Business Economist at S&P Global Market Intelligence, said.
Regarding the inflation dynamics, Williamson noted that selling price inflation ticked higher in May. “The main inflationary impetus is now coming from manufacturing rather than services, meaning rates of inflation for costs and selling prices are now somewhat elevated by pre-pandemic standards in both sectors to suggest that the final mile down to the Fed’s 2% target still seems elusive,” he elaborated further.
What to expect from the next S&P Global PMI report?
PMI surveys are widely accepted as forward-looking or leading indicators. As the Federal Reserve (Fed) clings to a data-dependent approach to policymaking, investors will pay close attention to PMI data heading into the weekend.
The S&P Global Manufacturing PMI is forecast to edge lower to 51.0 from 51.3 in May, and the Services PMI is expected to retreat to 53.7 from 54.8. A reading above 50.0 presents an expansion in the sector’s business activity.
When will June flash US S&P Global PMIs be released and how could they affect EUR/USD?
The S&P Global Manufacturing, Services and Composite PMI reports will be issued on Friday, June 21, at 13:45 GMT.
In case either the Manufacturing or the Services PMI unexpectedly falls below 50.0 and points to contraction, the initial market reaction could make it difficult for the US Dollar (USD) to find demand and help EUR/USD edge higher. On the other hand, the USD could gather strength if there is a positive surprise in either PMI print.
Focus will shift to the underlying details on employment and inflation developments if PMIs come in near analysts’ estimates. In case surveys highlight higher input inflation, investors could refrain from pricing in a Federal Reserve rate cut in September and trigger a leg lower in EUR/USD. A significant negative contribution to either PMI from employment could cause the USD to come under selling pressure and provide a boost to the pair.
FXStreet Analyst Yohay Elam thinks that upbeat PMI data would hurt Gold and support the US Dollar, while soft figures would have the opposite impact. “Stocks might follow the US Dollar if the data is weak – I expect investors to take profits off the table ahead of the weekend,” he adds.
In the meantime, Eren Sengezer, European Session Lead analyst at FXStreet, shares a brief technical outlook for EUR/USD:
“EUR/USD needs to climb above 1.0790-1.0800, where the 100-day and the 200-day Simple Moving Averages are located, and confirm that area as support to attract technical buyers. In this scenario, the pair could target 1.0900 (static level, psychological level) and 1.0950 (static level from March).”
“On the downside, sellers could take action with a drop below 1.0670 (Fibonacci 78.6% retracement of the uptrend from mid-April) and cause EUR/USD to slide toward 1.0600 (static level).”
Economic Indicator
S&P Global Composite PMI
The S&P Global Composite Purchasing Managers Index (PMI), released on a monthly basis, is a leading indicator gauging US private-business activity in the manufacturing and services sector. The data is derived from surveys to senior executives. Each response is weighted according to the size of the company and its contribution to total manufacturing or services output accounted for by the sub-sector to which that company belongs. Survey responses reflect the change, if any, in the current month compared to the previous month and can anticipate changing trends in official data series such as Gross Domestic Product (GDP), industrial production, employment and inflation. The index varies between 0 and 100, with levels of 50.0 signaling no change over the previous month. A reading above 50 indicates that the private economy is generally expanding, a bullish sign for the US Dollar (USD). Meanwhile, a reading below 50 signals that activity is generally declining, which is seen as bearish for USD.
Next release: Fri Jun 21, 2024 13:45 (Prel)
Frequency: Monthly
Consensus: -
Previous: 54.5
Source: S&P Global
* The content presented above, whether from a third party or not, is considered as general advice only. This article should not be construed as containing investment advice, investment recommendations, an offer of or solicitation for any transactions in financial instruments.
