EUR / USD
The Euro remained under pressure in early Europe on Thursday, but did avoid fresh 9-month lows against the dollar and looked to stabilise despite further vulnerability in equity markets. As equities attempted to rally, the Euro secured a slight recovery to the 1.1700 area.
ECB chief economist Lane stated that underlying inflation is not defined by any single indicator and emphasised the symmetric 2% inflation target. There was little underlying impact with markets expecting the central bank to maintain a very accommodative policy stance.
Initial jobless claims declined to 348,000 in the latest week from a revised 377,000 previously and below consensus forecasts of 365,000 while continuing claims edged lower to 2.82mn from 2.90mn previously, although this figure was slightly above market expectations.
The Philadelphia Fed manufacturing index edged lower to 19.4 for August from 21.9 previously and below forecasts of 23.0. There was a slightly stronger reading in new orders for the month, but unfilled orders and shipments increased at a slightly faster rate while supply issues continued.
Employment increased at a faster pace with further strength in the workweek. Inflation readings remained important with stronger rates of increase in both costs and prices received. Companies were slightly less optimistic over the six-month outlook while companies expected that prices would increase at a faster pace.
Equities rallied further after the New York open, but the dollar secure renewed gains with commodity currencies subjected to renewed selling pressure while the Euro consolidated around 1.1680 at the US close. Overall risk conditions remained very fragile on Friday and the dollar maintained a strong tone as commodity currencies remained vulnerable. The Euro was able to resist further losses with some defensive demand as carry trades were liquidated and held around 1.1685.
JPY
Equities declined sharply in early Europe which triggered sharp demand for the Japanese yen and the dollar dipped to lows near 109.50. US Treasuries maintained a strong tone ahead of Thursday’s New York open, but the 10-year yield found support close to 1.22% and edged higher to 1.24% as Wall Street equities rallied from lows. The dollar also rallied to the 109.70 area, although the yen maintained a firm underlying tone.
Overall risk appetite remained fragile, especially with further concerns over the delta variant and reports that three US Senators had tested positive despite being vaccinated triggered further concerns. Liquidity levels remained low during the Asian session, maintaining the threat of position liquidation.
The Chinese central bank held interest rates steady which were in line with market expectations, although there was a further dip in confidence following the decision. The dollar also broke above the 6.50 level against the yuan which reinforced underlying dollar demand.
The yen continued to gain an element of support from vulnerable risk conditions on Friday with the dollar held around 109.70 with the Euro just above the 128.0 level.
GBP
Sterling continued to drift lower on Thursday, primarily under the influence of weaker risk appetite amid the slide in global equities and sharp losses in commodity prices.
There were no significant data releases during the day, but the weakness across equity markets triggered some speculation that the Bank of England would be even less willing to consider a tightening of monetary policy. Sterling was unable to regain ground when equity markets rallied and retreated to lows below 1.3650 against the dollar while the Euro posted net gains to 0.8560 as the negative tone surrounding risk appetite continued to undermine support.
UK consumer confidence edged lower to -8 for August from -7 previously UK retail sales declined 2.5% for July compared with expectations of a 0.2% increase with year-on-year growth slowing to 2.4% from 9.7% amid a sharp decline in-store sales. Risk trends tended to dominate market moves with Sterling unable to regain ground and near 4-week lows around 1.3630 against the dollar while the Euro traded at 4-week highs near 0.8570.
CHF
The Swiss franc edged higher in early Europe on Thursday, although gains were relatively contained given the slide in risk appetite and increase in fear. The Euro stabilised around 1.0735 against the franc while the dollar hit resistance close to 0.9200.
Vulnerable risk conditions and demand for defensive assets continued to underpin the franc and limit the potential for franc selling. Markets remained wary over the potential for National Bank intervention to curb franc gains with the Euro just above 1.0700 while the dollar was held around 0.9165.
Technical Levels
