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The US NFIB small-business confidence index edged higher to 100.1 for August from 99.7 previously. The dollar was held in tight ranges ahead of the New York open with no major Euro-zone developments, although markets were monitoring developments surrounding the German election this weekend.

US consumer prices increased 0.3% in August after a 0.5% increase the previous month and slightly below consensus forecasts. The year-on-year rate edged lower to 5.3% from 5.4% previously and in line with consensus forecasts. The underlying increase was held to 0.1% from 0.3% previously and below market expectations of 0.3% with the year-on-year rate declining to 4.0% from 4.3%.

Energy prices increased 2.0% on the month with an annual increase of 25%. There was a monthly decline in used car prices with the annual increase declining to 31.9% while overall services excluding energy were unchanged on the month. The data bolstered the argument that overall inflation pressures would be transitory.

The dollar dipped lower after the data with increased confidence that inflation would moderate and limit the potential for a more aggressive stance from the Federal Reserve. There were no comments from Fed officials with the central bank in a blackout period ahead of next week’s policy meeting.

The dollar regained ground after the Wall Street open and the Euro hit resistance on approach to 1.1850 with a retreat to near 1.1800 after the European close as fragile risk conditions curbed any US selling. The US currency was unable to extend the gains on Wednesday with the Euro holding just above the 1.1800 level.




US Treasuries strengthened after the US inflation data with the 10-year yield retreating to near 1.30%. US equity futures also posted initial gains, although selling pressure returned quickly which maintained a cautious risk tone. The yen gained significant support with the dollar retreating to around 109.65 at the European close.

Japan’s Reuters tankan manufacturing index dipped sharply to a 5-month low of 18 from 33 the previous month with important supply-side difficulties while the services-sector index dipped to -2 from 5 previously. The data maintained unease surrounding the near-term outlook, although companies did expect conditions to recover.

Chinese industrial production increased 5.3% in the year to August from 6.4% previously and below consensus forecasts of 5.8%. There was a very substantial miss for retail sales with the annual increase held to 2.5% from 8.5% previously and compared with expectations of 6.9%. The data triggered a fresh round of unease over the Chinese outlook, especially with ongoing concerns over the Evergrande situation with the property giant likely to miss near-term loan repayments. Chinese equity markets were, however, resilient which helped underpin risk appetite. The dollar was held near 109.50 as the yen maintained a solid tone with the Euro around 129.30.




Sterling edged lower following the latest labour-market data, although overall selling pressure was limited and there was solid buying support on dips and the UK currency regained ground into the New York open.  There was further speculation that the tight labour market would trigger a tightening of monetary policy by the Bank of England. The government confirmed that there will be a third booster vaccine rollout for those aged over 50.

Sterling strengthened after the US inflation data but was unable to hold above the 1.3900 level against the dollar. UK Cabinet Minister Frost warned that the EU needed to show flexibility in talks over implementing the Northern Ireland trading arrangement or the UK may decide to unilaterally suspend the protocol.

Sterling was already losing traction and Brexit concerns triggered a further correction, especially with a significant impact from weaker risk appetite. There was a retreat to around 1.3850 against the dollar while the Euro again found support near 0.8510 and recovered to 0.8530.

The headline UK CPI inflation rate increased sharply to 3.2% from 2.0% previously and above expectations of 2.9% with the core rate jumping to 3.1% from 1.9%.  Sterling edged higher to 1.3820 against the dollar amid speculation that the Bank of England would move closer to tightening, although the overall reaction was muted.




The Euro briefly edged above 1.0900 against the franc on Tuesday but failed to hold the advance and there was a retreat to the 1.0860 area. The Swiss currency gained an element of support from the weaker tone surrounding risk appetite and the dollar was again unable to hold above the 0.9200 level.

The Euro found support above 1.0850, but the franc maintained a solid tone on Wednesday with the Euro just above 1.0860 while the dollar consolidated close to 0.9200. Markets will continue to monitor National Bank rhetoric and potential intervention in the short term.


Technical Levels

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