US S&P Global Composite PMI edged higher to 54.6 in June's flash estimate from 54.5 in May, showing that the business activity in the US' private sector continued to expand at a healthy pace.
S&P Global Manufacturing PMI rose to 51.7 in the same period from 51.3, while the Services PMI rose to 55.1 from 54.8. Both of these readings came in above analysts' estimates.
Assessing the survey's findings, "the early PMI data signal the fastest economic expansion for over two years in June, hinting at an encouragingly robust end to the second quarter," said Chris Williamson, Chief Business Economist at S&P Global Market Intelligence.
Regarding inflation dynamics, "selling price inflation has meanwhile cooled again after ticking higher in May, down to one of the lowest levels seen over the past four years," Williamson added and continued: "Historical comparisons indicate that the latest decline brings the survey’s price gauge into line with the Fed’s 2% inflation target."
Market reaction to US PMIs
The US Dollar gathered strength against its rivals with the immediate reaction. At the time of press, the USD Index was up 0.2% on the day at 105.85.
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 | 0.18% | 0.22% | 0.16% | 0.15% | 0.18% | 0.07% | 0.25% | |
| EUR | -0.18% | 0.02% | -0.02% | -0.02% | 0.03% | -0.10% | 0.06% | |
| GBP | -0.22% | -0.02% | -0.08% | -0.06% | -0.00% | -0.14% | 0.05% | |
| JPY | -0.16% | 0.02% | 0.08% | 0.00% | 0.04% | -0.07% | 0.14% | |
| CAD | -0.15% | 0.02% | 0.06% | -0.01% | 0.02% | -0.08% | 0.11% | |
| AUD | -0.18% | -0.03% | 0.00% | -0.04% | -0.02% | -0.15% | 0.07% | |
| NZD | -0.07% | 0.10% | 0.14% | 0.07% | 0.08% | 0.15% | 0.19% | |
| CHF | -0.25% | -0.06% | -0.05% | -0.14% | -0.11% | -0.07% | -0.19% |
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.
- S&P Global preliminary PMIs are expected to confirm ongoing expansion in the US private sector’s business activity in June.
- Survey details on inflation and employment will be scrutinized by market participants.
- EUR/USD needs to clear 1.0790-1.0800 to attract buyers.
S&P Global will issue flash estimates of the United States (US) Purchasing Managers Indexes (PMIs) for June, a monthly survey of business activity, on Friday. The survey is expected to show that the economic activity in the private sector continued to expand at a moderate pace.
In May, S&P Global Composite PMI improved to 54.5 from 51.3 in April. The Manufacturing PMI edged higher to 51.3 from 50.0, while the Services PMI climbed to 54.8 from 51.3. Assessing the survey’s findings, “the US economic upturn has accelerated again after two months of slower growth, with the early PMI data signaling the fastest expansion for just over two years in May,” Chris Williamson, Chief Business Economist at S&P Global Market Intelligence, said.
Regarding the inflation dynamics, Williamson noted that selling price inflation ticked higher in May. “The main inflationary impetus is now coming from manufacturing rather than services, meaning rates of inflation for costs and selling prices are now somewhat elevated by pre-pandemic standards in both sectors to suggest that the final mile down to the Fed’s 2% target still seems elusive,” he elaborated further.
What to expect from the next S&P Global PMI report?
PMI surveys are widely accepted as forward-looking or leading indicators. As the Federal Reserve (Fed) clings to a data-dependent approach to policymaking, investors will pay close attention to PMI data heading into the weekend.
The S&P Global Manufacturing PMI is forecast to edge lower to 51.0 from 51.3 in May, and the Services PMI is expected to retreat to 53.7 from 54.8. A reading above 50.0 presents an expansion in the sector’s business activity.
When will June flash US S&P Global PMIs be released and how could they affect EUR/USD?
The S&P Global Manufacturing, Services and Composite PMI reports will be issued on Friday, June 21, at 13:45 GMT.
In case either the Manufacturing or the Services PMI unexpectedly falls below 50.0 and points to contraction, the initial market reaction could make it difficult for the US Dollar (USD) to find demand and help EUR/USD edge higher. On the other hand, the USD could gather strength if there is a positive surprise in either PMI print.
Focus will shift to the underlying details on employment and inflation developments if PMIs come in near analysts’ estimates. In case surveys highlight higher input inflation, investors could refrain from pricing in a Federal Reserve rate cut in September and trigger a leg lower in EUR/USD. A significant negative contribution to either PMI from employment could cause the USD to come under selling pressure and provide a boost to the pair.
FXStreet Analyst Yohay Elam thinks that upbeat PMI data would hurt Gold and support the US Dollar, while soft figures would have the opposite impact. “Stocks might follow the US Dollar if the data is weak – I expect investors to take profits off the table ahead of the weekend,” he adds.
In the meantime, Eren Sengezer, European Session Lead analyst at FXStreet, shares a brief technical outlook for EUR/USD:
“EUR/USD needs to climb above 1.0790-1.0800, where the 100-day and the 200-day Simple Moving Averages are located, and confirm that area as support to attract technical buyers. In this scenario, the pair could target 1.0900 (static level, psychological level) and 1.0950 (static level from March).”
“On the downside, sellers could take action with a drop below 1.0670 (Fibonacci 78.6% retracement of the uptrend from mid-April) and cause EUR/USD to slide toward 1.0600 (static level).”
Inflation FAQs
Inflation measures the rise in the price of a representative basket of goods and services. Headline inflation is usually expressed as a percentage change on a month-on-month (MoM) and year-on-year (YoY) basis. Core inflation excludes more volatile elements such as food and fuel which can fluctuate because of geopolitical and seasonal factors. Core inflation is the figure economists focus on and is the level targeted by central banks, which are mandated to keep inflation at a manageable level, usually around 2%.
The Consumer Price Index (CPI) measures the change in prices of a basket of goods and services over a period of time. It is usually expressed as a percentage change on a month-on-month (MoM) and year-on-year (YoY) basis. Core CPI is the figure targeted by central banks as it excludes volatile food and fuel inputs. When Core CPI rises above 2% it usually results in higher interest rates and vice versa when it falls below 2%. Since higher interest rates are positive for a currency, higher inflation usually results in a stronger currency. The opposite is true when inflation falls.
Although it may seem counter-intuitive, high inflation in a country pushes up the value of its currency and vice versa for lower inflation. This is because the central bank will normally raise interest rates to combat the higher inflation, which attract more global capital inflows from investors looking for a lucrative place to park their money.
Formerly, Gold was the asset investors turned to in times of high inflation because it preserved its value, and whilst investors will often still buy Gold for its safe-haven properties in times of extreme market turmoil, this is not the case most of the time. This is because when inflation is high, central banks will put up interest rates to combat it. Higher interest rates are negative for Gold because they increase the opportunity-cost of holding Gold vis-a-vis an interest-bearing asset or placing the money in a cash deposit account. On the flipside, lower inflation tends to be positive for Gold as it brings interest rates down, making the bright metal a more viable investment alternative.
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