EUR / USD
The Euro remained vulnerable in early Europe on Monday with the weaker than expected German economic data hampering support. Production declined 1.5% for June compared with consensus forecasts of a 0.1% decline and followed a 0.1% retreat for the previous month.
The Euro-Zone Sentix investor confidence index improved to –18.9 for August from –22.5 previously and compared with consensus forecasts of –23.4. There was further weakness in Germany, but there was evidence of recoveries in some other countries for the month which pulled the overall index higher.
There was evidence that an easing of headline inflation was helping underpin confidence.
The Euro dipped to lows around 1.0965 against the dollar, but was able to resist further losses and the stronger than expected Sentix data helped underpin the single currency with a move to test 1.1000 against the US currency.
Markets were continuing to look ahead to US and Chinese inflation releases later in the week given the impact on risk appetite and interest rate expectations.
Narrow ranges prevailed later in the session with the Euro creeping above 1.0000 before settling below this level as the dollar secured a firm overall tone on Tuesday.
The dollar secured a net advance to near 142.50 against the yen after Monday’s European open, but was unable to hold the gains.
The US employment trends index strengthened to 115.45 for July from 114.31
In comments on Monday, New York Federal ReservePresident Williams stated that inflation is coming down as hoped and he expects that unemployment will increase slightly over the next few months. Willaims also stated that it was possible that interest rates would decline in 2024.
Fed Governor Bowman repeated comments that she expects additional rate hikes will be necessary.
The dollar dipped to lows at 141.80 after Williams comments, but then regained ground with a recovery towards 142.50.
Japanese wages data was weaker than expected with the annual increase in cash earnings dipping to 2.3% for June from 2.9% previously and below expectations of 3.0%. The data maintained expectations of a very dovish Bank of Japan policy which undermined the yen.
Weaker than expected trade data from China also undermined risk appetite and the dollar posted strong gains to highs near 143.50 before a retreat to 143.15.
Halifax reported that UK house prices declined 0.3% for July after a 0.1% retreat previously, although the year-on-year decline moderated to 2.4% from 2.6% previously.
Sterling drifted lower in early Europe on Monday, but managed to hold above the 1.2700 level against the dollar and gradually recovered ground with a peak just below 1.2790 as the US currency lost ground in currency markets.
The Euro also lost ground with a retreat to lows near 0.8600 before settling around 0.8615.
According to Bank of England chief economist Pill, there are risks on both sides for UK inflation. There is a risk that inflation will fall below target, but also risks that the central bank has not raised interest rates enough.
The comments overall provided slight Sterling support with gains to 1.2790 against the dollar with the Euro edging lower to 0.8610.
BRC retail sales data recorded 1.8% annual growth in like-for-like sales from 4.2% previously, increasing reservations over near-term consumer spending trends.
Sterling settled around 1.2755 against the dollar with the Euro edging higher to near 0.8620.
Total Swiss sight deposits increased slightly to CHF 492.2bn in the latest week from CHF490.1bn the previous month. This was the second successive weekly increase which increased speculation that the National Bank does not see the need to tighten domestic liquidity conditions any further.
The franc overall lost ground after the data with the Euro securing a net advance to just above 0.9620 while the dollar settled close to 0.8750.
There was little net change on Tuesday with the dollar around 0.8730.