EUR / USD
The Euro-zone Sentix investor confidence index strengthened to -13.4 for August from -18.2 previously and above consensus forecasts of -15.1, although there will still be some concerns over the rate of improvement given that there positive readings ahead of the coronavirus crisis. Market conditions were still relatively subdued as is often the case on Monday trading following the US employment report. Overall trading volumes also remain limited on seasonal grounds.
There were some concerns that the Euro could be unsettled by a slide in the Turkish lira. The single currency dipped to lows below 1.1750 ahead of the New York opening before regaining ground as the dollar struggled to maintain any traction, especially as there was fresh demand for precious metals.
The US employment trends index strengthened to 50.9 for July from 49.5 the previous month, although this compares with a figure of 109.0 for February. The JOLTS data recorded an increase in job openings to 5.89mn at the end of June from 5.37mn previously, although there was a decline in the number hires while separations increased on the month. Underlying caution over labour-market trends persisted, but the dollar attempted to correct higher.
The Euro recovered some ground after the New York open, but there was selling interest below 1.1800 and an underlying retreat on major crosses was a negative factor which eroded support and it edged back to near-daily lows with a fresh retreat to below 1.1750. There was consolidation just below 1.1750 in early Europe on Tuesday.
The dollar strengthened into Monday’s New York open with a move back above the 106.00 level, although overall momentum was lacking and the US currency edged back below this level in early US trading as markets continued to monitor US-China tensions during the day.
There were hopes that US talks on the fiscal stimulus package would resume which helped underpin risk appetite, although equities were held in relatively tight ranges. Meanwhile, President Trump’s executive order to replace some unemployment benefits provided a limited lift to confidence amid hopes that downward pressure on spending would be cushioned, although California stated that the state would not be able to pay their contribution.
The White House stated that it was deeply troubled over the arrest of pro-democracy advocate Lai in Hong Kong while President Trump played down the importance of the trade deal with China with markets wary over the risk of a further escalation in tensions.
US bond yields edged higher which provided an element of dollar support while the S&P 500 index posted a 5-month high. Overall, the dollar edged above the 106.00 level as yen demand remained subdued amid the solid tone in risk appetite with the Euro just above 124.50 against the Japanese currency.
Prime Minister Johnson will set out at the end of the week whether to go ahead with the re-opening of the rest of the economy. There was an element of caution ahead of the important UK data releases this week. Overall Sterling sentiment remained generally fragile, especially with ahead of trade negotiations, but the currency was again resilient during the day. The currency drew some support from a generally firm tone surrounding risk appetite. There were net gains against the dollar with a test of the 1.3100 area while the Euro retreated to around 0.8980 before Sterling buying faded.
Bank of England MPC committee member Ramsden commented that further quantitative easing could be sanctioned if the economy weakens again. BRC data recorded an increase in sales of 4.3% in the year to July from 10.9% previously while Barclaycard reported a 2.6% decline in overall consumer spending in the year to July. The headline unemployment rate held at 3.9% compared with expectations of 4.2%, but jobless claims increased over 94,000 in the month. Payrolls declined 730,000 compared with March while the number of hours worked hit a record low, although vacancies increased slightly. The data will maintain unease over underlying labour-market trends. Sterling reaction was muted with slight net losses as the UK currency retreated to near 1.3070 with Euro around 0.8985.
The Euro secured net gains ahead of the US open, but was unable to break above the 1.0800 level which helped trigger correction and a retreat towards 1.0750.
The franc regained ground later in the day with underlying demand for precious metals providing net support, although a wider Euro retreat had a greater influence. The dollar edged towards the 0.9150 area amid limited net gains as selling pressure eased slightly.
Equity markets held firm in Asian trading on Tuesday which limited defensive franc demand, although the dollar was held close to 0.9150.