US April S&P Global PMIs set to show lower readings for services and manufacturing sectors

The S&P Global advanced PMIs for April are seen worsening further.
Markets expect the Federal Reserve to cut rates in June by 25 bps.
EUR/USD keeps the trade in the area of three-year highs past 1.1500.

This Wednesday, S&P Global will unveil its preliminary April Purchasing Managers’ Indices (PMIs) for the United States, drawing on surveys of senior private sector executives to offer an early read on economic momentum.

The report comprises three measures — the Manufacturing PMI, the Services PMI and the Composite PMI (a weighted blend of the two) — each calibrated so that readings above 50 denote expansion and those below 50 signal contraction. Published well ahead of many official statistics, these monthly snapshots assess everything from output and export trends to capacity utilization, employment and inventory levels, providing one of the first indicators of the economy’s direction.

In March, the Composite PMI came in at 53.5, improving from the previous month’s 51.6 reading. According to Chris Williamson, Chief Business Economist at S&P Global Market Intelligence, “The strong start to the year for US manufacturers has faltered in March. A combination of improved optimism surrounding the new administration and the need to front-run tariffs had buoyed the goods-producing sector in the first two months of the year, but cracks are now starting to appear. Production fell for the first time in three months in March, and order books are becoming increasingly depleted.”

What can we expect from the next S&P Global PMI report?

Investors are bracing for a modest pullback in April’s flash Manufacturing PMI, expected to slip from 50.2 to 49.4, while the Services PMI is forecast to ease from 54.4 to 52.8.

Although a slight downturn in factory output may not alarm markets, any resilience — or rebound — above the 50 threshold could soothe lingering growth concerns, especially if service sector momentum holds firm.

Investors will be zeroing in on the PMIs’ granular inflation and employment gauges. In his latest comments, Fed Chair Jerome Powell underscored the Fed’s deliberate approach to restarting its easing cycle, warning that anchoring consumer price expectations remains paramount amid mounting uncertainty over President Trump’s tariff crusade.

A marked surprise in the services PMI — paired with manufacturing’s return to expansion — would likely give the US Dollar a boost. Meanwhile, evidence of rising input costs in services alongside robust job gains would cement bets on a “higher‑for‑longer” Fed. Conversely, signs of easing price pressures and lackluster private sector hiring could rekindle hopes for fresh monetary relief — and weigh on the Greenback.

When will the March flash US S&P Global PMIs be released, and how could they affect EUR/USD?

The S&P Global Manufacturing, Services and Composite PMIs report will be released on Wednesday at 13:45 GMT and is expected to show US business activity extending the loss of momentum observed since the turn of the year.

Ahead of Wednesday’s PMI flash readings, Pablo Piovano, Senior Analyst at FXStreet warns that a bullish turn in EUR/USD could see spot challenge its YTD peak of 1.1572 (April 21), ahead of the October 2021 high at 1.1692 (October 28), and the September 2021 top at 1.1909 (September 3).

Conversely, Piovano notes that occasional bearish moves should not meet any support of relevance until the critical 200-day Simple Moving Average (SMA) at 1.0762, which reinforces the weekly trough at 1.0732 (March 27).

“While above the 200-day SMA, the pair’s bullish stance should remain unchanged”, Piovano adds.

Technical indicators still paint a constructive picture, although they warn of a potential correction in the pipeline: While the Average Directional Index (ADX) surpasses the 51 level, indicative of a strong trend, the Relative Strength Index (RSI) well in the overbought region above 75 hints at the idea that a probable “technical correction” may be in the offing, Piovano concludes.

US Dollar FAQs

The US Dollar (USD) is the official currency of the United States of America, and the ‘de facto’ currency of a significant number of other countries where it is found in circulation alongside local notes. It is the most heavily traded currency in the world, accounting for over 88% of all global foreign exchange turnover, or an average of $6.6 trillion in transactions per day, according to data from 2022. Following the second world war, the USD took over from the British Pound as the world’s reserve currency. For most of its history, the US Dollar was backed by Gold, until the Bretton Woods Agreement in 1971 when the Gold Standard went away.

The most important single factor impacting on the value of the US Dollar is monetary policy, which is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability (control inflation) and foster full employment. Its primary tool to achieve these two goals is by adjusting interest rates. When prices are rising too quickly and inflation is above the Fed’s 2% target, the Fed will raise rates, which helps the USD value. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates, which weighs on the Greenback.

In extreme situations, the Federal Reserve can also print more Dollars and enact quantitative easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system. It is a non-standard policy measure used when credit has dried up because banks will not lend to each other (out of the fear of counterparty default). It is a last resort when simply lowering interest rates is unlikely to achieve the necessary result. It was the Fed’s weapon of choice to combat the credit crunch that occurred during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy US government bonds predominantly from financial institutions. QE usually leads to a weaker US Dollar.

Quantitative tightening (QT) is the reverse process whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing in new purchases. It is usually positive for the US Dollar.

Economic Indicator

S&P Global Services PMI

The S&P Global Services Purchasing Managers Index (PMI), released on a monthly basis, is a leading indicator gauging business activity in the US services sector. As the services sector dominates a large part of the economy, the Services PMI is an important indicator gauging the state of overall economic conditions. The data is derived from surveys of senior executives at private-sector companies from the services sector. 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. A reading above 50 indicates that the services economy is generally expanding, a bullish sign for the US Dollar (USD). Meanwhile, a reading below 50 signals that activity among service providers is generally declining, which is seen as bearish for USD.