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There was further uncertainty over gas supplies to the EU with the planned maintenance period for the Nord-Stream pipeline due to come to an end later this week. Gas prices edged lower on the day and a resumption of supplies would help underpin Euro-Zone economic confidence to some extent.

The Euro pushed higher just after the European open and, although it failed to hold its best levels, it held above 1.0100 against the dollar.

The US currency overall maintained a weaker tone with further expectations that the US economy would lose traction amid a tightening of financial conditions.

The NAHB housing index dipped sharply to 55 for July from 67 previously which was well below consensus forecasts of 66 and the lowest reading since May 2020. Federal Reserve officials have commented on the importance of the housing sector for calibrating their interest rate decisions and degree of monetary tightening required. The weaker than expected NAHB data was another important facto dampening expectations of a more aggressive Fed rate hike at this month’s policy meeting.

In this environment, there was renewed dollar selling and the Euro pushed towards 1.0200 before a retreat to 1.0160 towards the European close.

There were some reservations over selling the Euro ahead of Thursday’s ECB policy meeting with uncertainty over the interest rate decision and caution surrounding the new plans to curb the threat of fragmentation in bond markets. Risk appetite was less confident later in the US session which undermined potential Euro support as the dollar regained some ground. The Euro retreated to lows around 1.0120 before stabilising around 1.0150 in early Europe on Tuesday with some buying on dips.




US Treasuries posted losses after Monday’s New York open with the 2-year yield edging back towards 3.20% while the 10-year yield edged above 3.00%. There was an element of bond buying after the US housing data with the 10-year yield settling around 3.00% in choppy trading.

The dollar overall lost ground with a retreat to re-test the 138.00 level before a recovery to 138.30 towards the European close.

US Treasuries were little changed on Tuesday and there should be no guidance from Federal Reserve officials ahead of next week’s policy meeting. There were also no major developments surrounding the Chinese outlook as markets monitored coronavirus developments. Overall risk conditions were little changed in Asia with the dollar holding close to 128.00 while the Euro traded just below the 140.00 level. There will be an element of caution ahead of this week’s Bank of Japan policy.




In comments on Monday, Bank of England external member Saunders warned that price pressures could be harder to stop than the bank’s central forecasts due to a declining potential growth rate. He added that he thought the tightening cycle still had some way to go and it was plausible that rates could increase to at least 2.0%. He added that the cost of tightening too slowly was probably higher than the risk of raising rates too much and it was not correct that a neutral rate is 1%.

The rhetoric remained broadly hawkish, although the overall impact was relatively limited given that Saunders has been consistently hawkish and will also leave the Monetary Policy Committee after the August meeting.

Sterling did, however, maintain a firm tone with firmer risk appetite helping to underpin sentiment while there was also an important element of short covering.

The UK currency managed to regain the 1.2000 level ahead of the European close with the Euro retreating towards 0.8480. Sterling was unable to hold above 1.2000 and retreated towards 1.1950 as risk conditions deteriorated. The Conservative Party leadership election had little impact, but tax policies will be in focus and comments from Bank of England Governor Bailey will be watched closely during the day.

The UK employment data was stronger than expected, but there was a slowdown in headline average earnings growth which may ease Bank of England concerns to some extent. Overall risk conditions remained important with Sterling edging higher to 1.1970 against the dollar with further evidence of short covering.




Total Swiss sight deposits edged higher to CHF745.4bn in the latest week from CHF745.0bn previously. After two weeks of notable declines, the stabilisation in deposits suggested that the National Bank had decided against any further action to strengthen the Swiss currency.

The Euro secured a strong recovery to around 0.9930 against the franc while dollar declined only marginally despite


Technical Levels 




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