The upcoming US economic data release is a hot topic, with a potential to stir controversy and impact the markets. Will the US economy maintain its momentum?
On Friday, S&P Global will unveil the November flash Purchasing Managers' Indices (PMIs) for major economies, including the US. These PMIs are like a sneak peek into the health of the business sector, surveying top executives in the private sector.
Here's what the markets are predicting: the Global Services PMI is expected to hit 54.8, matching October's performance, while the Global Manufacturing output might dip slightly to 52, compared to 52.5 in the previous month. The Composite PMI, a blend of the two, stood at 54.6 in October.
But let's not forget the context: the US has just emerged from its longest government shutdown, leaving a data drought in its wake. The September Nonfarm Payrolls (NFP) report, released on Thursday, revealed a surprising 119,000 new jobs, beating expectations of 50,000. However, the Unemployment Rate rose to 4.4%, and the Participation Rate increased to 62.4%, somewhat balancing the negative impact. This mixed bag of data has the markets cautiously optimistic, with the US Dollar (USD) facing near-term selling pressure.
The S&P Global PMIs could have an unusual impact on the USD, especially with the Fed's December monetary policy meeting on the horizon. S&P Global provides insights into manufacturing and services through separate PMIs, and also offers a combined view via the Composite PMI. A reading above 50 signals growth, while below 50 suggests contraction.
The PMI report has two versions, and here's where it gets interesting: the preliminary estimate and the final revision, released two weeks later. The initial flash estimates often have a more significant effect on the USD.
What's the market's take on the upcoming PMI report? Despite lower manufacturing figures, the overall economic outlook remains positive. Meeting expectations is good news, especially for the Manufacturing PMI. Solid numbers could fuel market optimism and temporarily reduce USD demand, but they're unlikely to sway the Fed's upcoming decision unless they're shockingly bad, which is not expected.
But wait, there's more! The reports also include sub-indices on employment and inflation, which are closely monitored. These sub-indices might have a bigger impact than the headline figures since they're central to the Fed's decision-making. Significantly worse data could reignite speculation of a Fed cut in December, potentially weakening the USD.
Mark your calendars: The S&P Global PMIs for Manufacturing, Services, and Composite will drop at 14:45 GMT on Friday, and they're expected to show continued US business expansion in November. As of now, the USD is losing ground against major currencies in a risk-on environment, influenced by the September NFP report.
FXStreet's Chief Analyst, Valeria Bednarik, offers technical insights: "EUR/USD rebounded modestly from near 1.1500 on Thursday due to risk appetite, but the near-term outlook remains bearish." She highlights key technical levels and suggests potential price movements for the currency pair.
Now, let's talk about the Fed: The Federal Reserve, with its dual mandate of price stability and full employment, shapes US monetary policy. They primarily adjust interest rates to meet these goals. When inflation exceeds the Fed's 2% target, they raise rates, making the US more appealing to international investors and strengthening the USD. Conversely, when inflation drops below 2% or unemployment is high, rate cuts encourage borrowing and weaken the Greenback.
The Fed's eight annual policy meetings are attended by the Federal Open Market Committee (FOMC), comprising twelve Fed officials. In extreme cases, the Fed may deploy Quantitative Easing (QE), increasing credit flow in a struggling financial system. This non-standard measure was used during the 2008 crisis, involving the Fed buying high-grade bonds from financial institutions, which typically weakens the USD.
Quantitative tightening (QT) is the opposite of QE, where the Fed stops buying bonds and doesn't reinvest in new ones, usually supporting the USD.
S&P Global Manufacturing PMI: This monthly indicator provides an early look at US manufacturing health. It's based on surveys of private-sector executives, comparing the current month to the previous one. A reading above 50 suggests manufacturing growth, bullish for the USD, while below 50 indicates contraction, bearish for the currency.
Next release: The S&P Global Manufacturing PMI is set for November 21, 2025, at 14:45 (Preliminary).
