A first look at S&P Global’s Composite PMI indicated that US business activity grew faster in July, with the index rising to 54.6 from the previous month’s 52.9. The number, which is over the 50 mark that divides expansion from contraction, suggests that the private sector is gathering traction.
The statistics showed that different industries were performing in a mixed fashion. The Manufacturing PMI dropped from 52.9 to 49.5, which means that manufacturing activity lost momentum. The Services PMI, on the other hand, increased from 52.9 to 55.2, which might mean that demand in the services sector is picking up momentum.
Following the news release, Chris Williamson, Chief Business Economist at S&P Global Market Intelligence argued: “The flash PMI data indicated that the US economy grew at a sharply increased rate at the start of the third quarter, consistent with the economy expanding at a 2.3% annualized rate. That represents a marked improvement on the 1.3% rate signalled by the survey for the second quarter.”
Market reaction
The Greenback remains in “recovery mode” following several days in the red, with the US Dollar Index (DXY) attempting a decent rebound to the 97.30-97.40 region following the data release.
US Dollar PRICE Today
The table below shows the percentage change of US Dollar (USD) against listed major currencies today. US Dollar was the strongest against the Swiss Franc.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.02% | 0.23% | 0.01% | 0.19% | -0.11% | -0.03% | 0.24% | |
| EUR | 0.02% | 0.26% | 0.02% | 0.23% | -0.09% | -0.01% | 0.26% | |
| GBP | -0.23% | -0.26% | -0.24% | -0.03% | -0.34% | -0.27% | 0.00% | |
| JPY | -0.01% | -0.02% | 0.24% | 0.18% | -0.13% | -0.10% | 0.09% | |
| CAD | -0.19% | -0.23% | 0.03% | -0.18% | -0.28% | -0.24% | 0.03% | |
| AUD | 0.11% | 0.09% | 0.34% | 0.13% | 0.28% | 0.08% | 0.35% | |
| NZD | 0.03% | 0.01% | 0.27% | 0.10% | 0.24% | -0.08% | 0.27% | |
| CHF | -0.24% | -0.26% | -0.00% | -0.09% | -0.03% | -0.35% | -0.27% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the US Dollar from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent USD (base)/JPY (quote).
This section below was published as a preview of the US S&P Global PMI data at 08:00 GMT.
- The S&P Global flash PMIs for July are seen improving further, suggesting the US economy continued to expand.
- Markets expect the Federal Reserve to keep its interest rates unchanged at the end of the month.
- EUR/USD manages to regain some pace and flirts with the 1.1700 area.
S&P Global will release on Thursday its preliminary July Purchasing Managers’ Indices (PMIs) for the United States, based on surveys of top private sector executives, to provide an early indication of economic momentum.
The report includes three measures: the Manufacturing PMI, the Services PMI, and the Composite PMI (a weighted combination of the two), each calibrated such that numbers above 50 indicate growth and readings below that threshold indicate contraction.
These monthly snapshots, released far ahead of many official figures, analyse everything from production and export patterns to capacity utilisation, employment, and inventory levels, offering some of the earliest signs of the economy’s direction.
The Composite PMI ticked down marginally to 52.9 in June from 53.0 the previous month. According to Chris Williamson, Chief Business Economist at S&P Global Market Intelligence, “The US service sector reported a welcome combination of sustained growth and increased hiring in June but also reported elevated price pressures, all of which could add to pressure on policymakers to remain cautious with regard to any further loosening of monetary policy.”
What can we expect from the next S&P Global PMI report?
Investors anticipate a little increase in July’s flash Manufacturing PMI from 52.0 to 52.5, while the Services PMI is projected to rise from 52.9 to 53.0.
Although a minor decline may not scare markets, any resilience – or rebound – above the 50-point level might alleviate lingering economic fears, particularly if service sector momentum remains strong.
Investors will focus on the PMIs’ granular inflation and employment measures. Fed Chair Jerome Powell has said that inflation is projected to accelerate in reaction to US tariffs, causing the Federal Reserve (Fed) to adopt a cautious tone. Despite some Fed officials suggesting a quarter-point rate decrease as early as later this month, the market consensus expects the Fed to stay on the sidelines.
A significant upside surprise in the services PMI, along with a strong print from the manufacturing gauge, would likely bolster the US Dollar by confirming the idea of a healthy economy, hence supporting the Fed’s conservative attitude.
In contrast, evidence of easing pricing pressures and weak private sector hiring might reignite prospects for more monetary easing, weighing on the US Dollar.
When will the July flash US S&P Global PMIs be released, and how could they affect EUR/USD?
The S&P Global Manufacturing, Services, and Composite PMIs report will be released at 13:45 GMT and is expected to show US business activity extending the gain of momentum observed in the last readings.
Ahead of the release, Pablo Piovano, Senior Analyst at FXStreet, warns that the continuation of the ongoing recovery of the EUR/USD pair could see it challenge its yearly peak of 1.1830 (July 1), ahead of the September 2021 high at 1.1909 (September 3), and the critical milestone at 1.2000.
Alternatively, Piovano notes that the resurgence of the selling pressure should meet initial support at the monthly floor of 1.1556 (July 17), prior to the interim 55-day Simple Moving Average (SMA) at 1.1491, and the weekly base of 1.1445 (June 19).
“While above the 200-day SMA at 1.0910, the pair’s bullish stance should remain unchanged,” Piovano adds.
Tariffs FAQs
Tariffs are customs duties levied on certain merchandise imports or a category of products. Tariffs are designed to help local producers and manufacturers be more competitive in the market by providing a price advantage over similar goods that can be imported. Tariffs are widely used as tools of protectionism, along with trade barriers and import quotas.
Although tariffs and taxes both generate government revenue to fund public goods and services, they have several distinctions. Tariffs are prepaid at the port of entry, while taxes are paid at the time of purchase. Taxes are imposed on individual taxpayers and businesses, while tariffs are paid by importers.
There are two schools of thought among economists regarding the usage of tariffs. While some argue that tariffs are necessary to protect domestic industries and address trade imbalances, others see them as a harmful tool that could potentially drive prices higher over the long term and lead to a damaging trade war by encouraging tit-for-tat tariffs.
During the run-up to the presidential election in November 2024, Donald Trump made it clear that he intends to use tariffs to support the US economy and American producers. In 2024, Mexico, China and Canada accounted for 42% of total US imports. In this period, Mexico stood out as the top exporter with $466.6 billion, according to the US Census Bureau. Hence, Trump wants to focus on these three nations when imposing tariffs. He also plans to use the revenue generated through tariffs to lower personal income taxes.
GDP FAQs
A country’s Gross Domestic Product (GDP) measures the rate of growth of its economy over a given period of time, usually a quarter. The most reliable figures are those that compare GDP to the previous quarter e.g Q2 of 2023 vs Q1 of 2023, or to the same period in the previous year, e.g Q2 of 2023 vs Q2 of 2022.
Annualized quarterly GDP figures extrapolate the growth rate of the quarter as if it were constant for the rest of the year. These can be misleading, however, if temporary shocks impact growth in one quarter but are unlikely to last all year – such as happened in the first quarter of 2020 at the outbreak of the covid pandemic, when growth plummeted.
A higher GDP result is generally positive for a nation’s currency as it reflects a growing economy, which is more likely to produce goods and services that can be exported, as well as attracting higher foreign investment. By the same token, when GDP falls it is usually negative for the currency.
When an economy grows people tend to spend more, which leads to inflation. The country’s central bank then has to put up interest rates to combat the inflation with the side effect of attracting more capital inflows from global investors, thus helping the local currency appreciate.
When an economy grows and GDP is rising, people tend to spend more which leads to inflation. The country’s central bank then has to put up interest rates to combat the inflation. Higher interest rates are negative for Gold because they increase the opportunity-cost of holding Gold versus placing the money in a cash deposit account. Therefore, a higher GDP growth rate is usually a bearish factor for Gold price.
Read the full article here
