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The German labour-market data recorded a sharp increase in unemployment of 133,000 for June after a 4,000 decline the previous month while the unemployment rate increased to 5.3% from 5.0%. The much weaker than expected data was significant in undermining Euro support.

Source reports indicated that the ECB will use proceeds from maturing German, French and Dutch bonds to buy bonds from Italy, Greece, Spain and Portugal in order to cap yields and lessen the threat of fragmentation. The sources also indicated that the buying will start on July 1st as the wider bond-buying comes to a close.

The Euro, however, continued to lose ground and posted lows near 1.0380 ahead of the New York open as Italian yields moved higher.

US initial jobless claims declined marginally to 231,000 from a revised 233,000 and slightly above consensus forecasts with continuing clams unchanged at 1.33mn.

The PCE prices index increased 0.6% for May with the annual rate unchanged at 6.3%. The underlying rate recorded a 0.3% increase while the year-on-year rate declined to 4.7% from 4.9% and slightly below expectations of 4.8%. The slightly weaker than expected inflation triggered some fresh optimism that peak inflation pressures might have been seen. There was very choppy trading surrounding the London fix as month-end position adjustment dominated. Overall the dollar lost ground amid the decline in US yields with the Euro recovering to around 1.0480. The latest Euro-zone inflation data is due on Friday with the headline rate forecast to increase to a fresh record high of 8.5% from 8.1% previously. The dollar strengthened against commodity currencies on Friday, but the Euro held above the 1.0450 level.




Equity markets came under further pressure ahead of Thursday’s New York open which triggered an element of defensive yen support with the dollar dipping to near 136.0 before a tentative recovery as unease over a potential sharp slowdown in the economy sapped underlying confidence.

The Chicago PMI index retreated to 56.0 for June from 60.3 previously which below consensus forecasts of 58.0 and the weakest reading since August 2020. New orders dipped into contraction territory while inflation pressures eased with the prices paid index at the lowest level since February 2021.

Treasuries posted renewed gains after the US inflation data with the 10-year yield dipping to test the 3.00% level. Lower yields were important in undermining dollar support, although there was limited yen selling as equities recovered ground. Overall, the dollar dipped to lows around 135.60.

China’s Caixin PMI manufacturing index strengthened to 51.7 for June from 48.1 and above expectations, maintaining a slightly more positive assessment of the outlook, although there was a weaker Japanese Tankan manufacturing survey. Within the survey, increases in output prices increased at the fastest rate since October 1980, maintaining pressure for a shift in Bank of Japan policy. The latest US ISM manufacturing data will be watched closely on Friday for evidence on the outlook.

Risk appetite dipped again in Asia with fresh defensive yen demand and the dollar dipped to below 135.0 against the Japanese currency with the Euro around 141.30.




Sterling drifted lower in early Europe on Thursday with no support from the latest data, especially given a much larger than expected current account deficit of over £50bn for the first quarter. Given the tightening of global financial conditions, there were increased concerns that the UK would find it difficult to attract capital inflows without an even cheaper currency. Latest ONS data suggested that domestic activity had slowed in the latest week with the rail strike having a limited negative impact

Overall Sterling volatility increased during the day, especially given the impact of month-end position adjustment. The Pound dipped sharply to lows below 1.2100 against the dollar before a recovery to above 1.2150 with a rebound in equity markets having a significant impact in underpinning the currency. The Euro dipped to lows at 0.8550 before a recovery to above 0.8600 and Sterling still posted the sharpest 6-month decline against the dollar since 2016.

Speculation over a tax cut failed to support Sterling on Friday as it traded around 1.2135 against the dollar as weak risk appetite sapped overall UK support.




The Swiss KOF business confidence index retreated to 96.9 for June from a revised 97.7 previously, although slightly above market expectations. The franc gained further support as risk appetite deteriorated with the Euro dipping to fresh 7-year lows just below 0.9950. There was a recovery later in the day with a move to parity as equity markets pared losses while the dollar settled around 0.9550 from highs above 0.9600.

The Euro was little changed on Friday with the dollar edging higher as overall risk appetite remained fragile.


Technical Levels



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