Global PMIs Point to Uptick in Activity

CURRENCY FUTURES

The USD index is higher as investors await policy cues from Powell’s speech tomorrow. Given that a rate cut is already priced in, any hawkish comments from Powell are likely to provide support for the dollar, while any dovish comments are likely to see less of a reaction.  Powell is likely to make comments that reiterate that the outlook on inflation and economic growth due to tariffs remains unclear.

Euro futures are lower, pressured by the US-EU trade deal finalization and showing a muted reaction to positive PMI data. Eurozone Composite PMI rose to 51.1 in August of 2025 from 50.9 in the previous month, beating market expectations of a slowdown to 50.7 to mark the sharpest pace of expansion in the bloc’s private sector output since May of the previous year. The growth was supported by a third straight expansion in the services sector and an unexpected rebound for manufacturers, their first in over three years. In Germany, Europe’s largest economy, activity gained a little pace, while in France it continued to weaken but at a slower pace. Export orders continued to decrease, showing the fastest drop in five months in August, pointing to the impact of US trade tariffs. On the price front, input cost inflation was at a five-month high, driving firms to increase their output charges the most in four months. Despite the stronger headline reading, business confidence eased for a second month amid concerns of tariffs from the US and economic headwinds in the Euro Area. On the trade front, the US and EU on Thursday established a written framework for the trade deal agreed to on July 27. The terms include a 15% US tariff on most EU imports. These include autos, pharmaceutical goods, semiconductors, and lumber. Germany will release second-quarter GDP data Friday, while France’s business survey for August is also due.

British pound futures are little changed following PMI data that showed an uptick in business activity. UK S&P Global Composite PMI rose to 53 in August of 2025 from 51.5 in the previous month, ahead of expectations that it would inch higher to 51.6 to set the sharpest growth rate in private-sector business activity in one year, according to a flash estimate. The expansion was carried by the services sector (53.6 vs 51.8 in July), which also rose to a one-year high, to offset a steeper contraction for service providers (47.3 vs 48). Input inflation was at the highest since May, with firms citing the burden of higher National Insurance payments and their impact on labor costs. The data follows CPI inflation data released on Wednesday, which showed prices rose 3.8% on an annualized basis, up from 3.6% in June. The sets of data will likely keep policymakers at the Bank of England from cutting rates in the near term. However, on a positive note on the inflation picture, many of the inflation drivers in the report are likely to be one-off price increases. July retail sales on Friday, will round out the week.

Japanese yen futures are lower as markets await government data on Friday, which is expected to show that inflation remains well above the central bank’s 2% target. Consumer prices excluding fresh food are expected to have risen 3% from a year earlier in July, according to a poll of economists by data provider Quick. That compares with the 3.3% increase recorded in June. Pressure has been building on the BOJ to raise rates as inflation stays elevated and wages continue to lag behind price growth. New data shows that Japanese exports in July saw their biggest drop in four years, falling for a third straight month, a sign as to how US tariffs have impacted the economy. Exports declined 2.6% compared with the same period a year earlier, following a 0.5% drop in June, according to the Ministry of Finance on Wednesday. Economists had forecast a 2.1% decline. Shipments to the US fell 10.1% on the year due to weakness in automobile exports. That compared with June’s 11.4% contraction and marked the fourth straight month it has declined. Despite the fall, machinery orders grew 0.3% in June, up from May’s -0.4% slump, putting orders up 7.6% on the year.

Australian dollar futures are lower as PMI data pointed to an easing inflation picture while inflation expectations lowered. Australia’s private sector experienced its strongest expansion since April 2022, as the composite PMI climbed to 54.9 in August. The growth was fueled by solid gains in both the services and manufacturing sectors, underpinned by a surge in new orders and a broader customer base. At the same time, consumer inflation expectations eased for the second consecutive month, falling to 3.9% in August from 4.7% in July, the lowest level since March. In the first quarter, annual headline inflation remained steady at 2.4%, marking a four-year low and holding unchanged for the third straight quarter. Meanwhile, the trimmed-mean CPI, the Reserve Bank of Australia’s preferred gauge of core inflation, declined to 2.9%, its lowest reading since late 2021, though still slightly above the midpoint of the RBA’s 2–3% target range.

STOCK INDEX FUTURES

Stock index futures are lower, with all major indexes falling ahead of Friday’s long-anticipated Federal Reserve Symposium speech from Fed Chair Powell. On the earnings front, Walmart capped the week’s earnings from retail giants, raising its full-year forecast for sales and profit after its second-quarter results showed its low-price push was drawing in shoppers. However, its quarterly profit fell short of high expectations, and its shares slipped in premarket trading, leading the Dow and S&P lower. The slide in big tech stocks continues to weigh on the Nasdaq and S&P. Short sellers have reaped over $5 billion from bets against tech giants as fears of an overdone AI boom run through markets.

Weekly initial jobless claims came in higher than expectations, with 235,000 new claims for the week ending August 16.

The US and EU on Thursday established a written framework for their trade deal agreed to in late June. The terms include a 15% US tariff on most EU imports: these include autos, pharmaceutical goods, semiconductors, and lumber. Both sides also noted that the EU will work to remove tariffs on US industrial goods and give US seafood and agricultural exports better access to the European economy. Treasury Secretary Scott Bessent on Wednesday said that tariff revenue is to exceed $300 billion this year and that the revenues will be used to pay down federal debt. Earlier this week, S&P Global Ratings affirmed the US’s AA+ long-term credit rating with a stable outlook, saying tariff revenues will help offset the fiscal blow from President Trump’s recent tax and spending bill.

Elsewhere on the data front, the Philadelphia Fed Manufacturing Index for August fell far below expectations with a reading of -0.3. Economists were expecting a reading of 6.8. July posted a reading of 15.9, signaling a sharp drawdown in manufacturing activity. In the survey, firms reported continued hiring, though at a slower pace. Most reported no change in staffing, and the average workweek lengthened. Input costs surged, with the prices paid index hitting its highest level since May 2022. Selling prices also rose, though more gradually. Businesses forecast a 4.1% increase in their own prices over the next year and expect wage growth to slow slightly. They also anticipate competitors will raise prices within three months. Despite current weakness, firms are optimistic about future activity, with strong expectations for new orders, shipments, and capital spending.

Markets await remarks from Fed Chair Powell’s speech on Friday at the Fed’s Jackson Hole symposium. The event is often indicative of policymakers’ views on interest rates and could offer clues as to what will come next at the Fed’s meeting in September.

INTEREST RATE MARKET FUTURES

Futures are little changed across the curve, although they gained support following the weekly jobless claims data and a weak Philadelphia Fed Manufacturing survey. Fed minutes from the July meeting offered little surprises, with almost all officials supporting holding rates steady while two officials dissented in favor of a rate cut. Focus will now turn to PMI surveys due later today and any indication of how tariffs have impacted both activity and prices. Now that tariffs are in effect, the input cost component of the PMI surveys, particularly in the US, should give a sense of the impact of the higher tariffs on prices.

Friday’s long-anticipated speech from Powell will be the highlight of the week tomorrow. A rate cut in September is already priced in, so any hawkish comments from Powell are likely to result in a sell-off in the Treasury market. Markets will also look for any clues regarding the extent of easing from the Fed, although tariff talk regarding economic uncertainty is likely to be a mainstay of the speech.

The Philadelphia Fed Manufacturing Index sharply disappointed in August, falling to -0.3 versus expectations of 6.8 and down from 15.9 in July. This unexpected contraction in regional manufacturing activity may raise concerns about the durability of the broader industrial recovery. While firms continued hiring, the pace slowed, and most reported no change in staffing. Notably, input costs surged, with the prices paid index hitting its highest level since May 2022, signaling persistent cost pressures. Selling prices also rose, albeit more moderately, and firms expect to raise their own prices by 4.1% over the next year. The combination of weakening activity and sticky input inflation presents a mixed signal. The softening in demand could support a dovish tilt from the Fed, but elevated cost pressures and firm pricing intentions may keep policymakers cautious. The data complicates the inflation narrative and could reinforce the Fed’s “higher for longer” stance, especially if price pressures remain broad-based. Treasury yields may remain range-bound until Friday as markets weigh the risk of slowing growth against persistent inflation dynamics.

The spread between the two- and 10-year yields fell to 54.2 bps from 55.5 bps on Wednesday.

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