S&P Global is expected to release the United States (US) Purchasing Managers Indexes (PMIs) for June, which is a monthly survey of business activity in the private sector. The survey is predicted to show that economic activity in the private sector continued to expand at a moderate pace. In May, the S&P Global Composite PMI improved to 54.5 from 51.3 in April, with the Manufacturing PMI increasing to 51.3 from 50.0 and the Services PMI climbing to 54.8 from 51.3. Chris Williamson, Chief Business Economist at S&P Global Market Intelligence, mentioned that the US economic upturn has accelerated recently, indicating the fastest expansion in over two years in May.
Williamson also noted that selling price inflation ticked higher in May, with manufacturing being the main driver of inflation. However, the final mile down to the Federal Reserve’s 2% target still appears elusive. As PMI surveys are regarded as forward-looking indicators, market participants will closely analyze the data to gauge the economic outlook and potential Fed policy changes. The S&P Global Manufacturing PMI is expected to edge lower to 51.0, while the Services PMI is forecast to retreat to 53.7, with readings above 50.0 indicating an expansion in business activity.
The upcoming release of the June flash US S&P Global PMIs on Friday, June 21, will provide valuable insights into the state of the US economy. Depending on the outcome of the PMI reports, there could be implications for the EUR/USD currency pair. If either the Manufacturing or Services PMI falls below 50.0, indicating contraction, the USD may weaken, causing EUR/USD to rise. Conversely, positive surprises in the PMI data could strengthen the USD. Focus will also be on employment and inflation details, with potential implications for the Fed rate cut in September and the EUR/USD exchange rate.
Analysts anticipate that upbeat PMI data will have a negative impact on Gold but support the US Dollar, while soft figures may result in the opposite effect. Investors may adjust their positions based on the PMI data, especially if there are significant deviations from expectations. From a technical perspective, EUR/USD needs to breach key resistance levels around 1.0790-1.0800 to attract buyers and potentially target higher levels. On the downside, a drop below certain support levels could lead to a bearish trend for the pair.
The S&P Global Services PMI is a monthly indicator that assesses business activity in the US services sector, providing insights into the overall economic conditions. The Services PMI is derived from surveys of senior executives in the services sector and can anticipate changes in GDP, employment, and inflation. A reading above 50 signals expansion in the services economy, while a reading below 50 indicates contraction. The next release of the S&P Global Services PMI is scheduled for Friday, June 21, with a consensus forecast of 53.7.
Central banks play a crucial role in maintaining price stability in economies by managing inflation rates. Tools such as interest rate adjustments are used to control inflation and stimulate economic growth. Central banks like the Fed, ECB, and BoE aim to keep inflation close to 2% through their monetary policy decisions. Members of central bank policy boards, categorized as ‘hawks’ or ‘doves’, have differing views on the appropriate monetary policy stance. The central bank chairman leads policy meetings and communicates the bank’s stance to the public, aiming to avoid market disruptions. A consensus is reached between board members before implementing any policy changes.