EUR / USD
German unemployment declined 91,000 for July compared with consensus forecasts of a 28,000 fall which maintained near-term confidence in the short-term outlook. Euro-zone industrial sentiment strengthened to 14.6 from 12.8 previously and there was also a net gain in services sentiment. The overall business survey strengthened to 119.0 from 117.9 which helped underpin underlying Euro-zone confidence.
German consumer prices increased 0.9% in July with the year-on-year increase jumping to 3.8% from 2.3% and well above consensus forecasts of 3.3%. The Euro-zone CPI data will be released on Friday with the ECB expecting a near-term increase which will limit the impact.
The Euro held a firm tone into the New York open and edged higher to 1.1770 as the US dollar remained on the defensive following Wednesday’s Fed policy meeting.
US initial jobless claims declined to 400,000 in the latest week from a revised 424,000 figure the previous week, but again above consensus forecasts of 380,000. Continuing claims increased marginally to 3.27mn from 3.26mn previously with some reservations over trends.
The advance reading for second-quarter GDP came in at 6.5% from 6.3% the previous quarter, but well below market expectations of 8.5%. There was a very strong increase in consumer spending, but growth was held back by supply constraints. The data overall triggered further net reservations over the economic developments.
The dollar edged lower following the US data and posted fresh monthly lows with fresh reservations over a potential underlying slowdown in the economy.
Markets remained wary over the risk of month-end position adjustment and the Euro maintained a strong tone into the European close with highs just below 1.1900.The dollar secured a slight recovery on Friday amid a more defensive tone surrounding risk appetite with the Euro near 1.1880 ahead of US PCE prices data.
JPY
US Treasuries edged lower on Thursday with the 10-year yield edging higher while US equity futures posted net gains. The dollar was, however, vulnerable to wider selling pressure and retreated after the US data. The US currency was unable to recover ground into the European close and dipped to test 109.50 with no recovery into the Wall Street close even though underlying volatility subsided.
Japan announced that the state of emergency will be extended and there were also warnings that the overall infection rates had not peaked. Industrial production data was stronger than expected with a 6.2% annual increase and unemployment edged lower to 2.9% from 3.0%, although retail sales data was slightly below consensus forecasts. US equity futures moved lower in Asia and regional markets also declined with a more fragile tone surrounding risk appetite as Chinese markets lost ground.
The dollar was held just above 109.50 in early Europe with the Euro holding just above the 130.0 level against the Japanese currency.
GBP
UK mortgage lending increased sharply to £17.9bn for June from £6.80bn the previous month as lending surged ahead of the increase in stamp duty rates, but approvals declined to 81,300 for June from 87,000 the previous month while there was a limited net increase in consumer credit. The overall impact was limited, especially with distortions due to changes in tax rates, but underlying UK confidence held firm.
Sterling gained underlying support from solid risk conditions and gains in equity markets. Changes to travel regulations also helped underpin confidence. The UK currency traded to highs at 1.3980, but the scope for further progress was limited by trends on the crosses with the Euro attempting to hold above the 0.8500 level.
There was caution ahead of next week’s Bank of England policy meeting and markets were also wary over month-end position adjustment. Sterling overall held a firm tone, but the Euro continued to find support close to 0.8500 while the UK currency settled around 1.3960 against the dollar.
Sterling edged lower on Friday amid the more vulnerable risk conditions and traded just below 1.3950 against the US currency.
CHF
The Swiss franc maintained a strong tone on Thursday with the currency gaining further net support from expectations that yields across G10 currencies would remain extremely low. In this environment, there was further reluctance to sell the franc in global currency markets.
The Euro was held below the 1.0800 level while the dollar dipped to lows below 0.9070. Risk appetite was fragile during the Asian session on Friday which maintained underlying demand for the Swiss currency with the dollar held around 0.9070.
Technical Levels
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