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The Euro maintained a firm tone into the US open on Monday with the single currency continuing to edge higher as the dollar remained under selling pressure.

The New York Empire manufacturing index declined sharply to 3.7 for August from 17.2 the previous month and well below consensus forecasts of 14.5. New orders dipped into contraction territory with a sharp decline in unfilled orders. Prices received moved into positive territory and employment increased slightly for the month, although the workweek declined. Overall confidence in the outlook remained buoyant despite a second successive monthly decline.

The August NAHB housing index strengthened to a record high of 78 from 72 the previous month and above consensus forecasts of 73. Mortgage delinquencies posted the sharpest quarterly increase on record which triggered fresh concerns over the banking sector which could also hamper the wider economy.

Overall dollar demand remained weak with a lack of confidence in fundamentals and the Euro advanced to highs 1.18880 ahead of the European close with only a marginal correction later in the session as markets continued to punish the US currency.

Confidence in the US currency remained weak on Tuesday with the currency index retreating to near 26-month lows with the Euro pushing towards the 1.1900 level. Markets remained wary over very low liquidity levels which could lead to choppy trading, but the US currency remained on the defensive. 


Chinese monetary sources indicated that liquidity will be kept reasonably ample, although there were also comments that the PBOC will not resort to flood-like stimulus. The comments overall provided a limited net boost to risk appetite on hopes that Chinese demand would remain firm.

US Commerce Secretary Ross stated that China had been buying large amounts of US agricultural products as the political manoeuvring continued to dominate trade policy. The clash of trade policy and politics unsettled overall dollar confidence while the Chinese yuan held firm.

Global equity markets posted net gains on Monday, but the Japanese yen was resilient as the Euro failed to make headway against the Japanese currency. With wider selling pressure on the US dollar, it dipped sharply to test the 106.00 area late in the European session.

US currency selling increased after the break below 106.00 with on-going failure to secure a fiscal stimulus package also undermining confidence and the dollar dipped to near 105.50. The Reuters Japan Tankan manufacturing index improved to a 4-month high of -33 for -44 previously with a limited recovery in the services sector, with overall sentiment still weak. Asian equity markets overall made limited headway, but the yen resisted selling pressure and the dollar failed to secure a recovery.


Sterling made net gains against a notably fragile US dollar on Monday with a further test of resistance above the 1.3100 area. Underlying Sterling sentiment was still fragile on domestic economic reservations with the Euro advancing to highs near 0.9070 before a slight correction.  

Overall risk appetite held steady which limited the potential for further Sterling selling, although caution remained a key element, especially with low trading volumes.

According to IHS Markit, the financial conditions index declined to 40.8 for August from 41.5 the previous month with the sharpest decline in job security since 2011.

There were further reservations over the trade outlook ahead of the next round of UK-EU trade talks which are due to start on Tuesday with dinner attended by UK chief negotiator Frost and EU counterpart Barnier. There were underlying concerns that little progress would be made given the high risk that no major political decisions would be made until much closer to the deadline later in the year.

Dollar weakness dominated on Tuesday with the UK currency trading around 1.3130 while the Euro edged lower to near 0.9050 as Sterling was resilient.



The latest data on sight deposits recorded a further increase to CHF698.6bn from CHF695.6bn previously with the data continuing to indicate that the National Bank has been intervening steadily to limit franc support. There was still no evidence of substantial capital outflows from Swiss assets.

The Euro was unable to make any headway despite gains elsewhere and retreated to below 1.0750 as the Swiss franc benefited from gains in both gold and the Japanese yen. The dollar remained under pressure and re-tested 5-year lows around 0.9050. The US currency was unable to secure a recovery on Tuesday as demand for precious metals remained firm with markets continuing to monitor National Bank activity.



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