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EUR / USD

German retail sales declined 5.1% for July with an annual decline of 0.3% after a 6.5% increase the previous month. The Euro-zone PMI manufacturing index was revised marginally lower to 61.4 from the flash reading of 61.5.The were no direct comments on monetary policy from ECB President Lagarde with markets remaining on alert for ECB commentary ahead of next week’s policy meeting. The Euro did find support close to 1.1800 against the US currency.

The ADP jobs report recorded an increase in private-sector payrolls of 374,000 for August, substantially below market expectations of 615,000 while the July increase was revised marginally lower to 326,000. ADP noted that there was still a strong rate of jobs growth in all major sectors, especially in the leisure sector, but there had been a slowdown with the delta variant causing significant uncertainty over the outlook.

Although correlations with the monthly employment report have been very limited, the data had some impact in damaging confidence in Friday’s report and the potential for a lower than expected increase in jobs. In this environment, there were sharp dollar losses following the data with the Euro again challenging the 1.1850 area.

The US ISM manufacturing index edged higher to 59.5 for August from 59.5 the previous month and above consensus forecasts of 58.6. There was a stronger rate of growth in new orders and production on the month with a strong increase in order backlogs.

There was a reported net decline in employment for the month which also triggered some reservations over labour-market trends. Supply-side issues were still very important during the month, although there was a slight easing of upward pressure on prices.

The dollar looked to recover some ground following the ISM data, but was unable to gain significant traction with the Euro posting a 4-week high just above 1.1850 against the dollar. The Euro drifted lower to around 1.1840 against the dollar on Thursday as narrow ranges prevailed ahead of Friday’s employment report.

JPY

US Treasuries gained after the US ADP data with yields moving lower and the 10-year yield dipped to lows near 1.28% and the dollar dipped below the 110.00 level against the yen. There were some reservations over demand conditions in the US economy with adverse weather conditions amplifying the impact of the delta variant.

There was a recovery in yields following the ISM data with the dollar recovering some ground and it settled around 110.00 into the New York close.
Bank of Japan member Kataoka maintained a dovish stance with comments that the central bank should buy bonds more aggressively to push yields down.

The Chinese yuan edged lower on Thursday, although overall ranges were narrow with market caution prevailing ahead of Friday’s US jobs data. Trading volumes also remained low, especially with the US Labor Day holiday on Monday.

Asian equites were mixed and the dollar continued to settle around 110.00 against the yen with the Euro just above the 130.0 level against the Japanese currency.

GBP

Nationwide reported an increase in house prices of 2.1% for August after a 0.6% decline the previous month with the annual increase strengthening to 11.0% from 10.5% previously. There was a small upward revision to the August PMI manufacturing index to 60.3 from the flash reading of 60.1.

Sterling struggled to make significant headway, although the Euro did hit further resistance close to the 0.8600 level while US dollar losses also allowed Sterling gains to re-test the 1.3800 level. There were further concerns that the UK economic recovery would falter over the next few months.

The Bank of England announced that Huw Pill will be the bank’s new chief economist and will also take a seat on the Monetary Policy Committee. Markets will monitor any rhetoric from him closely with a particular focus on potential inflation trends and whether there needs to be a tightening of monetary policy.

The UK currency was unable to hold 1.3800 against the dollar as underlying sentiment remained fragile with the Euro just below 0.8600 in early Europe on Thursday.

CHF

The Swiss PMI manufacturing index retreated to 67.7 for August from 71.1 the previous month, but slightly above market expectations of 67.3.

Expectations of a more hawkish stance from the ECB continued to dent potential franc demand and the Swiss currency maintained a slightly weaker trend during the day. The Euro settled just below the 1.0840 level with the dollar just above 0.9150 with further speculation that the National Bank was intervening to push the currency lower. The Euro was little changed on Thursday with the dollar just above 0.9150 as markets remained focussed on global risk trends.

Technical Levels

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