• Keep an eye out: February’s preliminary S&P Global PMIs are expected to land pretty close to January’s final figures.
• Word on the street is, the Federal Reserve might just hit the ‘easing’ button again in July. 
• For the EUR/USD pair, things are looking a bit shaky in the short term, especially with those PMI numbers on the horizon. 

Get ready for Friday, folks! S&P Global is dropping its first peek at how the US economy is performing in February with their Purchasing Managers Indexes, or PMIs. Think of these PMIs as a quick pulse check on the economy, straight from the folks running businesses in the private sector. They survey top execs and give us a heads-up on crucial stuff like how the economy’s growing (GDP), what’s happening with prices (inflation), exports, whether factories are busy (capacity use), job levels, and stockrooms.

There are three PMI flavors to watch: one for manufacturing, one for services, and the Composite PMI, which is like a blend of the first two. Here’s the simple breakdown: if a PMI is above 50, it’s like saying “go,” meaning the economy is expanding. Below 50? That’s a “slow down” signal, indicating contraction. Because these numbers come out every month, way before a lot of the official government data, they’re a super useful early peek into the economy’s current vibe.

Back in January, the Composite PMI clocked in at 52.7. That was the lowest in a bit (since April ’24), but still showed businesses were doing alright. S&P Global noted, “Manufacturing production picked up again, but the service sector slowed down a bit. New orders also grew at a slightly slower pace in January. On the bright side, hiring actually sped up, reaching its fastest pace since June 2022! However, it’s worth noting that the costs businesses paid for their supplies and the prices they charged customers both increased at a faster rate.”

So, what’s on the cards for the next S&P Global PMI report?

Investors are betting that the early read on manufacturing PMI will inch up a tad from 51.2 to 51.5 in February. For services, the expectation is also for a slight bump up, from 52.9 to 53.0.

Even if manufacturing isn’t doing anything spectacular, this small improvement could be reassuring, especially if the services sector keeps showing solid growth.

But let’s be real, everyone’s really going to be glued to the inflation and employment parts of these surveys. After Fed Chair Jerome Powell played it cool about cutting interest rates further in his recent talks, the market is now leaning towards another rate cut happening in July.

Powell basically said, “No need to rush,” pointing to steady economic growth, a healthy job market, and inflation that’s still a bit too high (above that 2% target). He emphasized, “We don’t need to be in a hurry to adjust policy”.

Now, imagine if the Services PMI suddenly dips below 50. That could trigger a quick selloff of the US Dollar (USD). On the flip side, if services hold steady and manufacturing joins the party by moving above 50 into expansion territory, we might see the USD gain some strength against other currencies.

Looking ahead, if these PMI surveys reveal that service businesses are facing higher costs and the job market remains strong, it might reinforce the idea that the Fed will keep things tighter for longer financially speaking. But, if we see prices cooling down and weaker job creation in the private sector, that could reignite hopes for more rate cuts, possibly putting downward pressure on the USD.

When does the January flash US S&P Global PMIs report drop, and how could it wiggle the EUR/USD?

Mark your calendars! The S&P Global Manufacturing, Services, and Composite PMIs report arrives this Friday at 14:45 GMT, and the buzz is that it’s expected to show US business chugging along in expansion mode.

Just before the release, Pablo Piovano, a Senior Analyst at FXStreet, weighed in: “If the bulls take charge, EUR/USD might take a run at the February high of 1.0513 from February 14th. Keep an eye on 1.0532, the 2025 peak from January 27th, right after. If the price punches through these levels, traders might just see a surge up towards 1.0629, the December 2024 high (Dec 6th), once it clears the hurdle of 1.0572, the Fibonacci retracement from the September-January drop.”

“However,” Piovano adds, “if we see a return of a lasting downtrend, the pair could be heading back to test the February low of 1.0209 from February 3rd, and then the 2025 bottom of 1.0176 from January 13th. If it breaks below that, it could signal a bearish move all the way back down to the critical parity zone.”

“For now, the outlook stays a bit negative as long as the price hangs below its key 200-day SMA at 1.0743. Other signals, like the Relative Strength Index (RSI) hovering around 55, suggest some positive momentum is still there, although the Average Directional Index (ADX) below 15 is telling us the trend might be losing steam,” Piovano wraps up.