What to expect from the next S&P Global PMI report?

S&P Global Manufacturing PMI and Services PMI are both expected to come in at 52 in April’s flash estimate, highlighting an ongoing expansion in the private sector’s economic activity. Any reading above 50 signals economic activity is growing, while an indicator below this threshold suggests contraction.

Since the beginning of the year, the two main highlights of the US economy have been robust activity and stubborn inflation. Hence, market participants have shifted their expectations toward an extended delay in the Federal Reserve’s (Fed) policy pivot towards rate cuts. Earlier in the year, investors were forecasting the Fed to lower the policy rate as early as March. Employment, activity and inflation data in the first quarter of 2024 largely surprised to the upside and caused investors to reassess the US central bank’s policy outlook. According to the CME FedWatch Tool, markets currently price in a 65% probability that the Fed will lower the policy rate in September.

Flash PMI data for April are expected to confirm that the US economy preserved its strength to start the second quarter. Comments regarding the input costs could also point to ongoing inflationary pressures.

When will April flash US S&P Global PMIs be released and how could they affect EUR/USD?

The S&P Global PMI report will be released on Tuesday at 13:45 GMT. Ahead of the event, the US Dollar (USD) stays resilient against its rivals. The USD Index (DXY), which tracks the USD’s performance against a basket of six major currencies, seems to have entered into a consolidation phase after setting a five-month high above 106.00 in the previous week, boosted by hawkish Fed commentary and risk aversion.

Unless either the Manufacturing or the Services PMI unexpectedly drops below 50 and shows a contraction in the sector’s activity, the USD could hold its ground. If the publication highlights a downturn in private sector’s employment, or a softening in input costs, the USD could come under selling pressure even if headline PMIs hold above 50.

Eren Sengezer, European Session Lead Analyst at FXStreet, shares a brief outlook for EUR/USD:

“The Relative Strength Index (RSI) indicator on the daily chart stays below 40, suggesting that EUR/USD has more room on the downside before it turns technically oversold.”

“On the upside, 1.0700 (static level) aligns as interim resistance before 1.0750, where the 20-day Simple Moving Average (SMA) is located. A daily close above this level could attract technical buyers and open the door for an extended recovery toward the 200-day SMA at 1.0820. On the other hand, supports are located at 1.0600 (static level), 1.0500 (psychological level, static level) and 1.0450 (October 3 low).”