EUR / USD
There were relatively narrow ranges ahead of Wednesday’s New York open with markets mulling the impact of the Fitch move to downgrade the US credit rating.
US ADP data recorded an increase in private payrolls of 324,000 for July, again substantially above consensus forecasts of 190,000 while the June increase was revised down to 455,000 the previous month. There were job losses in manufacturing while there was a surge in leisure and hospitality jobs for the month.
Large companies cut jobs for the month while there were notable gains in payrolls within smaller companies.
The annual increase in wages for job stayers edged lower to 6.2% from 6.4% and the slowest rate of increase since November 2021.
The stronger than expected data triggered renewed dollar buying with the Euro retreating to re-test Tuesday lows.
Weaker risk conditions were also important in undermining the Euro amid fresh reservations over the global economy while the dollar secured additional defensive support. In this environment, the Euro dipped to 3-week lows just below 1.0920 against the US currency before a slight recovery.
The Euro was unable to secure a sustained recovery despite better than expected Chinese data and was held around 1.0935 in early Europe on Thursday.
The latest US data will continue to be monitored closely with the jobless claims and ISM services-sector data due on Thursday.
JPY
There was further choppy trading ahead of Wednesday's New York open with markets assessing whether Fitch’s move to downgrade the US credit rating would have a substantial or long-lasting impact. The dollar dipped to lows around 142.25 before stabilising.
Stronger than expected US jobs data triggered fresh dollar demand, especially with a sharp increase in US yields on the day.
As Treasuries posted sharp losses, the dollar hit highs near 143.50 against the yen amid expectations that the Fed will maintain a hawkish tone.
There was some relief from the latest Chinese data with the Caixin PMI index edging higher to 54.1 for July from 53.9 previously and significantly above market expectations of 52.5. There was still an important element of caution surrounding the Chinese and global outlook.
There was upward pressure on Japanese yields during the Asian session on Thursday. In response, the Bank of Japan intervened aggressively to buy bonds in an attempt to cap yields. The yen was unable to secure a significant recovery and advanced to fresh 3-week highs near 143.90 before a retreat to 143.50.
GBP
Sterling overall lost ground on Thursday with an element of position adjustment ahead of the Bank of England policy decision. The deterioration in risk conditions was also an important influence with weaker equities undermining Sterling support.
The latest YouGov poll recorded a decline in 1-year inflation expectations to 4.3% from 5.0% with long-term expectations at 3.2% from 3.3%.
The UK currency dipped to fresh 3-week lows at 1.2680 against the dollar while the Euro edged higher to 0.8615.
The Bank of England will announce its latest interest rate decision on Thursday. Consensus forecasts are for a further 25 basis-point hike in interest rates to 5.25%, although a significant minority expect a further 50 basis-point hike to 5.50%. Updated inflation forecasts and forward guidance will inevitably be an important factor in determining the Pound’s response. Futures markets have priced in at least a rate hike of 25 basis points.
Sterling was held close to 1.2700 against the dollar on Thursday with the Euro just above the 0.8600 level.
CHF
The Swiss PMI manufacturing index dipped sharply to 38.5 for July from 44.9 the previous month which was below expectations of 44.0 and the weakest reading since 2009. The weaker data will create some pressure for the National Bank to resist any further deterioration in the competitive position.
The Euro briefly strengthened to 0.9650 against the franc, but the Swiss currency secured an element of support from weaker risk conditions.
The Euro retreated to near 0.9600 while the dollar posted strong gains to highs just above 0.8800 before settling just below this level on Thursday.
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