Business activity in the US private sector, as measured by the S&P Global Purchasing Managers Index (PMI), is set to release its preliminary estimates for the August Manufacturing PMI and Services PMI. The previous survey showed a rise in the Manufacturing PMI to 49.0 from a June reading of 46.3, while the Services PMI fell to 52.0 from 53.2. The PMI readings indicated a slower growth rate for the US economy at the beginning of Q3.
Analysts expect the August Manufacturing PMI to improve to 49.3, while the Services PMI is predicted to drop to 52.2, compared to July’s 52.3. If the US PMI surprises positively, it could strengthen the narrative of higher rates for a longer period, potentially pushing back expectations of rate cuts by the Fed. A positive report could lead to a stronger US Dollar and put selling pressure on the EUR/USD pair.
Alternatively, if the US business activity disappoints, the US Dollar may extend its correction, as a potential economic slowdown could justify a Fed pause. Cooling economic activity would also help soften inflation, although fears of a ‘hard-landing’ could limit the downside in the safe-haven US Dollar. The EUR/USD pair is already experiencing downside risks, with immediate support at the 1.0800 level.