EUR/USD rebounds to near 1.0850 as the US Dollar (USD) corrects after a mixed preliminary S&P Global PMI report for July in Wednesday's American session. The Composite PMI came in higher at 55.0 than the former release of 54.8 due to robust activity growth in the service sector. The Service PMI surprisingly expanded at a faster pace to 56.0. Economists estimated the data to remain lower at 54.4 than the prior reading of 55.3. The Manufacturing PMI unexpectedly contracted to 49.5, while it was expected to advance higher to 51.7. A figure below the 50.0 threshold is considered a contraction in manufacturing activities.
Meanwhile, the market sentiment remains downbeat amid expectations that Donald Trump will come victorious in the United States (US) presidential elections in November and the uncertainty ahead of the Personal Consumption Expenditures Price Index (PCE) data for June, which will be published on Friday.
The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, falls from a fresh weekly high of 104.50. Expectations for Trump's return to power rose after an assassination attack on him. Meanwhile, Democrats have nominated Vice President Kamala Harris as leader to fight against Republicans.
On the economic front, investors will keenly focus on the US core PCE inflation data as it would provide fresh cues about when the Federal Reserve (Fed) will start reducing interest rates. The report is expected to show that core PCE inflation, the Fed’s preferred inflation measure, decelerated to 2.5% from May’s figure of 2.6%, with the monthly figure growing steadily by 0.1%.
The scenario in which price pressures decline expectedly or at a faster pace will boost expectations of early rate cuts by the Fed. On the contrary, stubborn figures would weaken rate-cut bets. According to the CME FedWatch tool, 30-day Federal Fund futures show the central bank will begin lowering its key borrowing rates from their current levels in the September meeting.
EUR/USD returns inside the Symmetrical Triangle formation on a daily timeframe after failing to hold the breakout. The major currency pair extends its downside below the 20-day Exponential Moving Average (EMA), which trades around 1.0840. The shared currency pair could slide further towards round-level supports near 1.0800 and 1.0700.
The 14-day Relative Strength Index (RSI) returns within the 40.00-60.00 range, suggesting the bullish momentum has faded.
On the upside, the round-level resistance at 1.0900 will be a key barrier for the Euro bulls.
The S&P Global Composite Purchasing Managers Index (PMI), released on a monthly basis, is a leading indicator gauging US private-business activity in the manufacturing and services sector. The data is derived from surveys to senior executives. Each response is weighted according to the size of the company and its contribution to total manufacturing or services output accounted for by the sub-sector to which that company belongs. Survey responses reflect the change, if any, in the current month compared to the previous month and can anticipate changing trends in official data series such as Gross Domestic Product (GDP), industrial production, employment and inflation. The index varies between 0 and 100, with levels of 50.0 signaling no change over the previous month. A reading above 50 indicates that the private economy is generally expanding, a bullish sign for the US Dollar (USD). Meanwhile, a reading below 50 signals that activity is generally declining, which is seen as bearish for USD.
Read more.Last release: Wed Jul 24, 2024 13:45 (Prel)
Frequency: Monthly
Actual: 55
Consensus: -
Previous: 54.8
Source: S&P Global
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