• S&P Global PMIs are expected to indicate business activity in the US continued to expand in February.
• Manufacturing and Services output seen advancing at a moderate pace. 
• EUR/USD stuck around 1.0800, signs of buyers losing interest. 

S&P Global will release the flash estimates of the United States (US) Purchasing Managers Indexes (PMIs) on Thursday, a survey that measures business activity throughout the month. The report is divided into services and manufacturing output and compiled in a final figure, the Composite PMI. 

The economic activity in the US private sector expanded at a modest pace in January, with the S&P Global Composite PMI reaching 52.0, following a bounce in manufacturing output to 50.7. At the same time, the services index reached 52.5.

Manufacturing has been lagging behind, although the latest reading has been quite encouraging, as it showed improvement in the sector’s health for the first time since April 2023. The official report notes: “Overall growth was supported by a return to expansion in new orders and a slower contraction in output. Production was reportedly hampered, however, by a renewed decline in supplier performance and longer input deliveries. Greater transportation costs pushed input prices higher on the month, with cost inflation hitting a nine-month high. In response, firms hiked their selling prices at the fastest rate since April 2023.”

The US economy is in expansion mode, which means the country will likely dodge a recession and even a soft landing. But this could come at the cost of higher inflation, which may prompt the Federal Reserve (Fed) into additional tightening. In such a case, higher rates will increase the risk of an economic setback. 

The US Fed paused monetary tightening in the last quarter of 2023, and market participants rushed to price in upcoming rate cuts. The odds centered in March as policymakers continued to deliver the “higher-for-longer” message. However, the late January Fed monetary policy meeting and hotter-than-anticipated inflation in January convinced investors that policymakers won’t rush into loosening the monetary policy. At the time being, the first rate cut is more likely to take place in June