ISM Services PMI Preview: US services sector expected to accelerate in August

• The US ISM Services PMI is expected to improve a tad in August.
• The US services sector should remain in the expansionary territory.
• Speculation of two rate cuts from the Fed this year remains on the rise.

On Thursday, we'll get the latest read on the US services sector when the Institute for Supply Management publishes its August Services PMI. Economists think the index will tick up to 51 from July's 50.1. If they're right, that would be the third month in a row the sector has grown, another reminder of its staying power and a small lift for confidence in the broader economy.

Still, the details from July weren't all upbeat. Hiring momentum slipped, with the ISM Employment Index dropping back into contraction at 46.4. New orders also lost a bit of steam, easing to 50.3, which hints that demand may be cooling. Despite the steady growth, the rising Prices Paid Index to 69.9 highlights the persistent inflation pressures.

What to expect from the ISM Services PMI report?

Inflation in the US is still running hotter than the Fed's 2% target, and that keeps policymakers uneasy, especially with the full effects of recent tariffs yet to filter through the economy.

The latest Personal Consumption Expenditures (PCE) report underscored this point. Core inflation, which strips out food and energy, rose 2.9% YoY in July, up from 2.8% in June and a touch higher than most forecasts. Headline PCE held steady at 2.6% annually, showing little sign of easing.

Against that backdrop, an ISM Services PMI that lands in line with expectations probably won't move the US Dollar much. It would simply confirm the picture of an economy that's still resilient but still wrestling with sticky price pressures. A softer-than-expected print, though, could shake confidence and see investors trim their USD holdings on fears that growth is losing momentum.

When will the ISM Services Purchasing Managers Index report be released, and how could it affect EUR/USD?

The Institute for Supply Management (ISM) will publish the Services Purchasing Managers Index (PMI) on Thursday at 14:00 GMT.

Pablo Piovano, Senior Analyst at FXStreet, notes that renewed selling pressure could first drag EUR/USD down to a weekly floor at 1.1574 (August 27), prior to its monthly low at 1.1391 (August 1). A break below the latter, he says, would put the late-May trough at 1.1210 back on the radar.

On the flip side, if the pair regains strength, it could retest the August ceiling at 1.1742 (August 22), seconded by the late-July high at 1.1788 (July 24), with the 2025 peak of 1.1830 not far behind. Clearing that zone, Piovano argues, could open the door to a run toward the psychologically important 1.2000 mark.

Overall, he adds, as long as EUR/USD stays above its 200-day Simple Moving Average at 1.1045, the broader constructive outlook for the pair remains intact.