The upcoming week is expected to be crucial for dollar traders as they await the release of the US ISM manufacturing and non-manufacturing PMI data for June. These reports, scheduled for Monday and Wednesday at 14:00 GMT, could provide insights into early signs of hiring trends and inflationary pressures. While the focus will be on the nonfarm payrolls report on Friday, the PMI readings could influence investors’ thoughts on the timing of rate cuts.
In May, the ISM PMI release fell below expectations, indicating a slowdown in manufacturing activity for the second consecutive month, remaining below the 50 mark. Despite the negative reaction in the US dollar, the employment index returning to expansion territory somewhat cushioned the impact. However, the non-manufacturing PMI survey helped boost the composite index back to growth territory, with services activities showing improvement, particularly in real estate and healthcare sectors.
Looking ahead to June’s ISM business PMIs, forecasts suggest a slightly higher manufacturing PMI of 49.0 and a softer services PMI of 52. These readings, if accurate, may not significantly alter the outlook for the US economy. However, an upbeat PMI report could raise doubts about the necessity of a rate cut in September.
Inflationary pressures are expected to continue playing a crucial role in monetary easing decisions, with the core PCE index meeting expectations for a slowdown to 2.6%. Despite this, the odds of a September rate cut remain above 60%. Comments from the San Francisco Fed president suggest that the central bank is still uncertain about the timing of interest rate cuts, indicating a cautious approach in the coming months.
In terms of EURUSD levels to watch, the pair remains below the nearby resistance of 1.0725. For bulls to gain momentum, the pair must surpass its SMAs within the 1.0770-1.0788 region. A sustainable rally above 1.0885 could shift the focus back to April’s highs. On the downside, sellers could take control below the 1.0660 support area, potentially pushing the pair towards the 1.0600 level.
Overall, the upcoming ISM business PMIs will be closely monitored by investors for any signs of changes in economic trends and inflationary pressures. The data could provide valuable insights into the likelihood of a rate cut in September and impact currency markets accordingly.