EUR / USD
Relatively narrow ranges prevailed ahead of Thursday’s New York open, but the Euro edged higher as the US dollar remained under pressure. Overall risk appetite held firm which limited potential defensive demand for the US currency, although Euro-zone equities did move lower.
US jobless claims declined to 963,000 in the latest week from 1.12mn the previous week and below consensus expectations of 1.11mn. Continuing claims declined to 15.49mn in the latest week from 16.09mn previously and also below market forecasts. There were still important reservations over the labour-market trends, especially given that claims could be lowered by eligibility issues and an increase in discouraged workers.
Import prices increased 0.7% for July with the year-on-year decline moderating to 3.3% from 3.8% as speculation over higher inflation increased slightly.
The dollar secured only brief respite as the downtrend resumed with fresh gains for the Euro and commodity currencies reinforcing downward pressure. The latest data recorded an increase in borrowing through the Federal Reserve main-street lending programme, reinforcing reservations over the underlying outlook.
The Euro peaked just above 1.1860, although the dollar did secure some relief later in the European session with the Euro retreating to the 1.1800 area. There were further concerns over Euro-zone coronavirus developments as the number of new German and French cases continued to increase with the Euro around 1.1820 as dollar sentiment remained fragile. Markets will remain wary over pre-weekend position adjustment and potential choppy trading.
US bond yields edged higher following the US jobless claims data which helped underpin the US dollar. President Trump stated that the dollar would be even stronger if he won a second term in November. Both the dollar and yen remained out of favours with fundamental concerns undermining the dollar while the yen was underlined by firm risk appetite and gains in global equity markets. Overall, the dollar held just below 107.00 at the European close.
There were further concerns over the failure to secure another fiscal stimulus package with a particular row over funding for the US Postal Service. The Democrats want to sanction additional funding for the service to support election infrastructure, but President Trump has vowed to block funding given his opposition to mail-in voting.
Equities faded late in the session, but the dollar was able to hold just below the 107.00 level.
Chinese industrial production increased 4.8% in the year to July, unchanged from the previous month while retail sales declined 1.1% in the year after a 1.8% decline previously. Both figures were below market expectations, although equities were resilient and the dollar drifted lower to the 106.80 area. Markets will be wary over US-China rhetoric with talks scheduled over the weekend to discuss progress on the phase-one trade deal and equities are liable to drift lower if unease increases.
The UK confirmed that the next round of Brexit talks will take place in Brussels next week with negotiators holding a dinner on Tuesday and a planned press conference on Friday. That leaves only two full days of talks, suggesting that the potential for any breakthrough in negotiations remains limited.
Nevertheless, UK chief negotiator Frost stated that a deal was achievable in September and Irish foreign minister Martin also stated that there was scope to find a landing zone in the negotiations. Sterling was able to resist further selling against the Euro on Thursday while dollar losses dominated as the UK currency pushed above the 1.3100 level. A slightly less confident global risk tone hampered the UK currency late in the European session. A dollar recovery nudged the UK currency lower while the Euro corrected slightly to 0.9030 from 0.9050 highs. Overall confidence in the UK outlook remained fragile, especially with unease over the labour market.
The UK added France and the Netherlands to the list of countries where returning UK travellers will need to quarantine for two weeks. The move reinforced uncertainty with Sterling marginally lower on Friday as the Euro edged towards the 0.9050 area and levels around 1.3070 against the dollar.
The Euro initially made headway on Thursday with an advance to near 1.0790 against the Swiss franc, although it was again unable to hold the advance and retreated to near 1.0750 amid a wider single-currency retreat. Precious metals held gains on the day which provided an element of franc support.
The dollar was unable to gain significant traction and settled around the 0.9100 level. There was little change on Friday with no major developments surrounding risk appetite as markets remained wary over coronavirus developments and the dollar held marginally above the 0.9100 level.