Will US S&P Global PMI point to the expected slowdown in October business activity?

• Expansion is expected to remain firmly intact across US business activity in October, despite a modest loss of momentum.
• After September's robust readings, forecasts suggest softer manufacturing and services survey results.
• If business activity exceeds expectations and strengthens the case for further Fed rate hikes, the US Dollar could gain support.

With next week's Federal Reserve (Fed) monetary policy meeting approaching, market attention turns to the United States (US) S&P Global preliminary Purchasing Managers Indices (PMIs) for October, due on Friday. The figures will offer a fresh assessment of conditions in the world's largest economy.

Private-sector business activity is tracked through the report's Manufacturing PMI, Services PMI and Composite PMI. A reading above 50 denotes expansion; one below that mark indicates contraction.

Resilient US economic activity, evident in recent data despite sustained inflationary pressures and high borrowing costs, forms the backdrop to the October surveys. Investors will scrutinise the readings for any loss of growth momentum or renewed price pressures that could shape the Fed's monetary policy outlook and movements in the US Dollar (USD).

Will October's S&P Global PMIs signal a modest slowdown?

A modest easing in US private-sector growth is the market's expectation for October, after September's particularly robust results. Forecasts put the S&P Global Manufacturing PMI at 55.6, slightly below September's 55.9, and the Services PMI at 57.9, down from 58.8. September's Composite PMI, meanwhile, registered 58.4, underscoring strong growth throughout the US private sector.

Even with some moderation expected in both sectors, the projected readings sit well above 50. They therefore point to continued expansion at a healthy pace in the US economy.

Persistent price pressures give this release added significance. Inflation has exceeded expectations in recent US data, while Retail Sales and labour market indicators still point to resilient domestic demand.

Following September's 25-basis-point (bps) increase, the Fed is widely expected to hold interest rates steady at its meeting on 28 October. Nevertheless, the CME FedWatch tool shows that investors have fully priced in a further rate hike in December.

How could October's flash US S&P Global PMIs move EUR/USD, and when are they due?

Friday at 13:45 GMT is the scheduled release time for October's S&P Global Manufacturing, Services and Composite PMIs. As investors adjust positions before the Fed's 28 October monetary policy decision, the data could spark volatility in both the US Dollar and EUR/USD.

Expectations of more Fed rate hikes over the coming months could strengthen if the report beats forecasts. That outcome would likely underpin US Treasury yields and the US Dollar, with EUR/USD potentially coming under pressure.

A more pronounced slowdown than forecast, especially in services, could instead prompt concerns over whether US economic growth can be sustained. If softer PMI readings lead investors to reconsider the prospects of further monetary tightening, the Greenback could face downward pressure while EUR/USD gains support.

A broadly in-line outcome, however, could elicit only a relatively muted market response, as forecasts already place both manufacturing and services activity firmly in expansion territory.

Investors have already largely factored in another December Fed rate hike. Their focus on Friday will therefore be whether the PMIs validate the US economy's resilience or indicate a slowdown. An upside surprise could bolster expectations of further monetary tightening; disappointing figures, by contrast, could raise questions about the strength of growth and put pressure on the US Dollar.

Trading beneath the 100-period Simple Moving Average (SMA) at 1.1223 and the 200-period SMA at 1.1213, EUR/USD retains a mildly bearish bias on the one-hour chart. The pair is edging along just above nearby price support. With the Relative Strength Index (14) hovering around 40, the signal is one of fading bullish momentum rather than outright oversold conditions. Downside risks therefore persist as long as these moving averages restrict gains.

The horizontal area near 1.1190 provides the first support, with further downside cushions at 1.1150 and 1.1114. Any advance would first encounter the 200-period SMA at 1.1213, then the 100-period SMA at 1.1223. Beyond those levels, the pair would need to regain the more substantial barriers at 1.1260 and 1.1285 to temper the prevailing bearish bias.

(The technical analysis of this story was written with the help of an AI tool. Know more.)