US S&P Global PMI forecast to show October slowdown in business activity

• October is expected to bring a modest easing in US business activity, though growth should remain firmly in expansionary territory.
• Following September’s strong readings, the manufacturing and services surveys are expected to soften.
• Stronger-than-forecast business activity could bolster expectations of further Fed rate rises, lending support to the US Dollar.

October’s preliminary United States (US) S&P Global Purchasing Managers Indices (PMIs), due on Friday, will offer a fresh assessment of the world’s largest economy before the Federal Reserve (Fed) holds its monetary policy meeting next week.

Private-sector business activity is assessed through the report’s Manufacturing PMI, Services PMI and Composite PMI. A reading above 50 denotes expansion; below that level, it indicates contraction.

Recent US data have continued to show resilient economic activity despite sustained inflationary pressures and high borrowing costs, setting the backdrop for October’s surveys. Investors will scrutinise the results for evidence of weaker growth and renewed price pressures, either of which could shape the Fed’s policy outlook and the US Dollar (USD).

US activity is expected to moderate in October’s S&P Global PMI report

Following September’s notably strong results, markets anticipate a modest loss of momentum in US private-sector activity in October. The S&P Global Manufacturing PMI is forecast to edge down from September’s 55.9 to 55.6, while the Services PMI is expected to fall from 58.8 to 57.9. September’s Composite PMI reading of 58.4, meanwhile, pointed to vigorous growth across the US private sector.

Even with some moderation expected in both sectors, forecasts remain well above the 50 mark. The anticipated readings therefore suggest that the US economy is still growing at a healthy rate.

Persistent inflationary pressures lend particular significance to this release. Inflation has exceeded expectations in recent US data, while Retail Sales and labour market measures continue to 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 28 October meeting. The CME FedWatch tool nevertheless shows that investors have fully priced in a further rate rise in December.

EUR/USD faces potential volatility as October’s flash US S&P Global PMIs approach

Friday at 13:45 GMT will bring the October S&P Global Manufacturing, Services and Composite PMI readings. As investors prepare for the Fed’s 28 October monetary policy decision, the release could spark volatility in both the US Dollar and EUR/USD.

Should the report exceed expectations, markets could become more confident of further Fed rate increases over the coming months. US Treasury yields and the US Dollar would likely benefit, potentially leaving EUR/USD under pressure.

By contrast, concerns over the durability of US growth could intensify if business activity slows more sharply than forecast, especially in services. Disappointing PMIs could prompt investors to reconsider the prospect of additional monetary tightening, weighing on the Greenback while lending support to EUR/USD.

A release broadly in line with forecasts, however, might elicit only a fairly muted market response: manufacturing and services activity are both expected to remain comfortably in expansionary territory.

With markets already largely pricing in another Fed rate increase in December, Friday’s PMIs will be examined closely for confirmation of US economic resilience or evidence of a slowdown. Results above forecasts could strengthen expectations of further tightening. Weaker readings, on the other hand, could raise questions about the strength of growth and put pressure on the US Dollar.

Trading below its 100-period Simple Moving Average (SMA) at 1.1223 and 200-period SMA at 1.1213, EUR/USD retains a mildly bearish tone on the one-hour chart. The pair is edging along just above nearby price support. At around 40, the Relative Strength Index (14) points to fading bullish momentum rather than outright oversold conditions, leaving downside risks in place while these moving averages limit advances.

The horizontal area around 1.1190 provides the first downside support, with further support at 1.1150 and 1.1114. Above the market, the 200-period SMA at 1.1213 forms the nearest resistance, ahead of the 100-period SMA at 1.1223. A recovery through the more substantial barriers at 1.1260 and 1.1285 would be needed to temper the prevailing bearish bias.

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