Will US S&P Global PMI show the expected moderation in October business activity?

• US business activity is forecast to remain firmly in expansion territory in October, despite a slight loss of momentum.
• After September's strong readings, manufacturing and services surveys are expected to show some moderation.
• Support for the US Dollar could emerge if business activity beats forecasts and strengthens expectations of further Fed rate hikes.

The outlook for the US Dollar and Federal Reserve (Fed) policy will come into focus on Friday with the release of October's preliminary United States (US) S&P Global Purchasing Managers Indices (PMIs). Ahead of next week's Fed monetary policy meeting, the data will offer a fresh assessment of conditions in the world's largest economy.

Private-sector business activity is tracked through the report's Manufacturing PMI, Services PMI and Composite PMI. A reading above 50 signals expansion; a figure below that threshold indicates contraction.

Resilience remains evident in recent US economic data, even as inflationary pressures persist and borrowing costs stay elevated. Against this backdrop, investors will scrutinise the October surveys for evidence of weaker growth or renewed price pressures, either of which could shape the Fed's policy outlook and the direction of the US Dollar (USD).

Will October's S&P Global PMI report show slower growth?

A modest cooling in US private-sector activity is the market's expectation for October, after September's particularly strong performance. Forecasts put the S&P Global Manufacturing PMI at 55.6, slightly below September's 55.9. The Services PMI is projected to moderate to 57.9 from 58.8. September's Composite PMI, meanwhile, came in at 58.4, signalling robust expansion across the US private sector.

The projected readings would still sit comfortably above the 50 threshold. Even with some loss of momentum in both sectors, they would therefore indicate that the US economy is maintaining a healthy pace of expansion.

Persistent inflationary pressures add to the significance of this release. Inflation has exceeded expectations in recent US data, while Retail Sales and labour market indicators continue to point to resilient domestic demand.

Following September's 25-basis-point (bps) increase, the Fed is widely expected to keep interest rates on hold at its 28 October meeting. Nevertheless, another rate hike in December is fully priced in by investors, according to the CME FedWatch tool.

How could EUR/USD react to October's flash US S&P Global PMIs, and when are they due?

Volatility in the US Dollar and EUR/USD could pick up when October's S&P Global Manufacturing, Services and Composite PMIs are published on Friday at 13:45 GMT. The release comes as investors adjust their positions ahead of the Fed's monetary policy decision on 28 October.

If the report exceeds expectations, markets could become more confident about additional Fed rate hikes in the coming months. US Treasury yields and the US Dollar would likely benefit in that scenario, with EUR/USD potentially coming under pressure.

By contrast, concerns over the sustainability of US economic growth could intensify if business activity slows more sharply than forecast, especially in services. Disappointing PMI readings could prompt investors to reconsider the prospects for further monetary tightening, weighing on the Greenback while lending support to EUR/USD.

A release broadly in line with forecasts, however, could draw a relatively muted market response. Both manufacturing and services activity are, after all, expected to remain firmly in expansion territory.

With markets already largely factoring in another Fed rate hike in December, Friday's PMIs will be assessed for confirmation of US economic resilience or evidence of a slowdown. Readings above forecasts could strengthen expectations of further monetary tightening. A disappointing outcome, on the other hand, could raise doubts about the strength of growth and put pressure on the US Dollar.

A modest bearish bias persists for EUR/USD on the one-hour chart as the pair trades below its 100-period Simple Moving Average (SMA) at 1.1223 and 200-period SMA at 1.1213. While the pair drifts just above nearby price support, the Relative Strength Index (14), at around 40, points to fading bullish momentum rather than outright oversold conditions. Downside risks therefore persist as long as these averages restrict advances.

The horizontal level near 1.1190 provides the first support on a decline, followed by lower levels at 1.1150 and 1.1114. Any recovery would face immediate resistance at the 200-period SMA of 1.1213, then the 100-period SMA of 1.1223. Beyond these, the pair would need to regain the stronger barriers at 1.1260 and 1.1285 to reduce the prevailing bearish bias.

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