In October, US private sector business activity showed growth with the S&P Global Composite PMI rising to 54.8, up from 53.9 in the previous month. Manufacturing PMI increased slightly to 52.2, and the Services PMI also saw a rise, climbing to 55.2 from 54.2.

The US Dollar Index made a modest recovery post-PMI data, standing at 98.94. This data impacted major currency pairs, with the US Dollar showing the most strength against the Japanese Yen.

EURUSD Market Dynamics

EUR/USD remained stable, trading just above 1.1600, amidst a Symmetrical Triangle pattern. The pair hovered close to its 20-day EMA with RSI indicating reduced volatility. Potential resistance and support levels exist around 1.1920 and 1.1400, respectively.

The S&P Global Services PMI is a key monthly indicator for US economic conditions, providing insights into the services sector’s performance. A figure above 50 suggests an expanding economy, beneficial for the US Dollar. The next release is scheduled for 24 October 2025, with a consensus forecast of 53.5.

The robust business activity shown in today’s PMI data suggests the US economy is stronger than many anticipated. With the composite index hitting 54.8, a significant jump, the narrative of an imminent Federal Reserve rate cut is now in question. This strength, despite a government shutdown, signals that we should be cautious about betting on a dovish policy shift.

This PMI reading is notably higher than the figures we saw throughout much of 2023 and 2024, which often hovered in the 50-52 range. Given that the services sector accounts for roughly 80% of US GDP, the strong print of 55.2 is a powerful indicator of underlying economic momentum. This data point alone could force a repricing of rate expectations in the coming weeks.

Fed Policy and Market Implications

This creates a conflict between strong growth data and other reports suggesting softer inflation, putting the Fed in a difficult position for its upcoming meeting. Such uncertainty is a clear signal to expect higher volatility, particularly in interest rate derivatives. We should consider strategies like straddles on Fed Funds or SOFR futures to capitalize on a significant policy move, regardless of the direction.

The immediate reaction is a firmer US Dollar, which has shown particular strength against the Japanese Yen. To trade this momentum, we can look at buying call options on the US Dollar Index or put options on the EUR/USD pair. This provides exposure to further dollar upside while clearly defining the risk involved in the trade.

For equity markets, this strong economic data is a double-edged sword for the Dow Jones, which is already at record highs. While good for corporate earnings, the prospect of higher interest rates for longer could halt the rally. We should look at buying protective puts on S&P 500 futures or purchasing call options on the VIX to hedge against a potential market downturn.

We have seen the economy push through government shutdowns before, such as the one back in 2013, without an immediate major impact on growth. This historical precedent supports the resilience shown in the current PMI numbers. However, a prolonged shutdown could change this dynamic, making short-term volatility plays a prudent approach.

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