The US economy is likely to show mixed signals in May’s preliminary S&P Global PMIs, with services expected to remain steady and manufacturing slipping further toward stagnation. This will be closely watched by investors looking for signs of broader economic momentum — and what it could mean for the Federal Reserve’s rate path.
April’s PMI readings reflected waning momentum in the private sector, and May is unlikely to deliver much relief. The Services PMI is forecast to hold at 50.8, while the Manufacturing PMI could fall slightly to 50.1, barely clinging to expansion territory.
Muted Data Expected as Fed Rate Cut Bets Mount
Market participants continue to price in a 25 basis point rate cut by the Fed in September, despite sticky inflation and hawkish commentary from central bank officials. The flash PMI readings could either reinforce or weaken those expectations depending on the inflation and employment subcomponents.
In April, the Composite PMI slipped to 50.6 from 51.2, pointing to slower business activity. Commenting on the findings, Chris Williamson of S&P Global noted that optimism declined sharply, with mounting price pressures complicating the Fed’s outlook.
Now, attention turns to whether May’s survey reflects any rebound — especially following the recent thaw in US-China trade tensions, which TD Securities believes might improve sentiment in services.
EUR/USD Holds Gains as Dollar Momentum Slows
The US Dollar has struggled to gain traction as expectations for further Fed hikes diminish. Meanwhile, the EUR/USD pair trades near a three-year high, supported by broad USD weakness and improved eurozone data.
On the upside, resistance levels stand at 1.1575 and 1.1670, while support is seen at 1.1200 and 1.1015–1.1000, according to technical charts. Should Thursday’s PMI data disappoint — especially with a drop below the 50 threshold — the USD may come under fresh selling pressure, helping EUR/USD extend gains beyond 1.1500.
Data to Drive Fed Expectations and Dollar Sentiment
With the Fed flipping between controlling inflation and a slowing economy, Thursday’s S&P Global PMIs will be crucial in determining short-term policy bets. Investors will be looking for clues of either sustained growth or softening inflation for the Fed as they certainly hope for more leeway to ease if inflation continues to soften.
For the US Dollar, this means another potential inflection point — strong data may remain significant, but negative data will likely further boost the EUR/USD rally and ease the Fed deeper into dove territory.
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