S&P Global is set to release its preliminary July Purchasing Managers’ Indices (PMIs) for the US on Friday, providing an early glimpse into the country’s economic momentum. Expectations point to modest shifts: the Services PMI might dip slightly to 51.0 from June’s 51.2, while the Manufacturing PMI is forecasted to climb to 54.5 from 53.9. Both readings would still signal expansion in their respective sectors.
Input Costs and Geopolitical Risks Under Watch
Beyond the headline numbers, the surveys will shed light on employment trends and input inflation, factors key for currency markets. Rising oil prices, driven by escalating US-Iran tensions and a near 30% jump in West Texas Intermediate crude this month, have complicated the outlook. Despite June’s unexpectedly soft inflation easing pressure on the Federal Reserve to hike rates, the recent commodity surge has dampened hopes for a prolonged pause.
According to TD Securities analysts, "Both manufacturing and services PMIs are expected to improve in July. Manufacturing should rebound to 54.5, supported by strong regional data like the Empire and Philly Fed surveys. Services are also likely to edge up to 51.5, catching up to ISM readings with improvements seen in the NY Fed services index." Market watchers are closely eyeing whether companies are facing rising costs and passing them on to consumers, a scenario that could fuel inflation fears and strengthen the US dollar against the euro.
The PMI data will be published at 13:45 GMT on Friday, with traders ready to react to any surprising dips below the 50 mark, which would indicate contraction. Such a move could pressure the dollar and provide support to EUR/USD.
Meanwhile, analysts at Rabobank warn that early PMI readings may not fully incorporate the latest geopolitical tensions and commodity price volatility, potentially underestimating their economic impact.
