EUR / USD
ECB council member Kazimir stated that the bank has room to wait for hard data and that it is not obliged to use the whole PEPP envelope. There were further concerns over Euro-zone coronavirus developments with Italy recording the highest number of daily new infections for over three months.
US durable goods orders increased 11.4% for July after a 7.7% increase the previous month and well above consensus forecasts of 4.3%. There was jump in transport orders and underlying orders increased 2.4% compared with market expectations of a 2.0% increase. Non-defence capital goods orders strengthened 10.2% following a 15.5% decline the previous month. The dollar secured gains following the US data with the Euro also registering significant losses. The single currency dipped to lows near 1.1770 against the US dollar and lost ground on the crosses, although there was a quick reversal with a move back above the 1.1800 level.
The Euro gained some support from the German announcement of a fresh fiscal stimulus with France also set to announce plans next week.
Kansas City Fed president George stated that there was a growing risk of a double-dip recession if the coronavirus pandemic intensifies. Richmond Fed President Barkin stated that jobs in most sectors are down 5-10%, maintaining generally cautious rhetoric, although markets were waiting for comments from the Fed Chair.
The Euro consolidated around 1.1815 at the European close with the dollar hampered by a fresh advance in commodity currencies together with a sharp rebound in precious metals. There was further caution ahead of Fed Powell’s speech on Thursday. He is due to outline the medium-term policy framework with markets expecting references to targeting a higher average inflation rate. The dollar will be vulnerable to a dovish slant while a more cautious tone could trigger short covering and there is the potential for volatile moves. The Euro settled around 1.1830 in early Europe as the dollar was unable to gain any significant traction.
The dollar maintained a firm tone ahead of the New York open, but was unable to break above the 106.50 level amid underlying reservations over the US outlook.
Markets were monitoring hurricane Laura which was close to making landfall as a category 4 hurricane late on Wednesday night US time.
There was some relief over the latest coronavirus data from Florida. Nevertheless, the dollar lost ground in US trading with a dip towards 106.00. The Japanese currency also gained some support on the crosses after retreating sharply earlier in the week which helped pull the US currency lower.
US equities posted fresh record highs, but the dollar edged below the 106.00 level as US sentiment remained negative.
Chinese industrial profits increased 19.6% in the year to July from 11.5% previously which helped underpin risk appetite. Markets were waiting for a scheduled press conference from Japanese Prime Minister Abe amid speculation that he could announce his resignation on health grounds. The yen overall was little changed with the dollar trading close to 106.00 as US 10-year bond yields declined from to 2-week highs with the yen little changed on the crosses.
There were no significant data releases during the day with markets still uneasy over UK fundamentals with a particular focus on the labour markets.
Sterling maintained a firm tone, however, and secured further net gains. The firm tone in global risk appetite continued to provide support with expectations of very dovish policies from the Federal Reserve and ECB also providing net UK currency support as trading volumes remained low.
Sterling was resilient despite reports that the EU would no longer be on the agenda for the EU Ambassadors meeting on September 2nd given the lack of progress in trade talks. EU Chief Negotiator reiterated that a deal was needed by the end of October, although markets suspected the potential for further slippage.
The Euro lost ground during the day with a retreat to lows around 0.8950 near the European close. The UK currency dipped to lows just below 1.3120 against the dollar before recovering sharply to trade above 1.3200. Sterling held firm just above 1.32 on Thursday with choppy moves likely later in the day.
The Swiss ZEW economic expectations index increased slightly to 45.6 for August from 42.4 previously and there was no significant impact on the franc. The Euro retreated to the 1.0730 area amid wider losses with the dollar unable to hold above the 0.9100 level.
The Swiss franc was underpinned by a fresh advance in gold during the day while underlying demand for hard currencies remained strong. Swiss GDP declined 8.2% for the second quarter after a revised 2.5% decline the previous quarter, slightly stronger than consensus forecasts of an 8.6% contraction, with little franc impact.