Market Braces for PMI Data as Fed Commentary Looms – GBP/USD and EUR/USD

Key Points:
The U.S. Dollar Index hovers near $99.78 as traders await key ISM and PMI data to gauge the Fed’s next move.
Fed rate-cut odds drop to 71% from 90% after Powell’s remarks, reinforcing a cautious stance on monetary easing.
European factory PMIs signal stabilization, with Italy at 49.3 and Germany steady at 49.6 amid slow recovery hopes.

Market Overview
The U.S. Dollar Index (DXY) trades near $99.78, holding firm as investors await a wave of manufacturing data across Europe, the U.K., and the U.S. today. Monday’s session was relatively calm, with the dollar supported by stronger Treasury yields and a cautious sentiment following last week’s 25-basis-point Fed rate cut.

Market expectations for another cut in December have eased to 71%, down from over 90%, according to CME’s FedWatch Tool.

European and U.K. PMIs to Set Early Tone
In Europe, preliminary data is expected to show slight stabilization in factory activity. Italy’s Manufacturing PMI is forecast at 49.3 versus 49.0 prior, while France and Germany are expected to hold steady at 48.3 and 49.6, respectively.

The U.K. Manufacturing PMI, due at 9:30 GMT, is projected at 49.6, unchanged from September, signaling continued contraction but no further deterioration.

ISM PMI to Test Dollar Momentum
Later today, the U.S. ISM Manufacturing PMI is forecast at 49.4, marginally above 49.1 in September, while ISM Prices are expected at 62.4 versus 61.9 prior. Any upside surprise could reinforce the Fed’s cautious tone and lift the dollar, while weaker prints may revive rate-cut expectations.

With multiple FOMC speakers lined up, traders will closely watch policy remarks for clues on how the Fed interprets incoming data amid slowing global growth.