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The Euro-Zone PMI manufacturing services index was revised higher to 51.2 in July’s final reading from the flash reading of 50.6. There was a stronger than expected reading for Spanish figure, but Italian services dipped into contraction territory. There was a slight easing of inflation pressures on the month.

The Euro was unable to make any headway ahead of the New York open and gradually drifted lower as the dollar maintained a firm tone.

There was a slight upward revision to the US PMI services index to 47.3 from the flash reading of 47.0.

The ISM non-manufacturing index strengthened to 56.7 for July from 55.3 the previous month and well above consensus forecasts of 53.5. There was a stronger rate of growth in business activity and a stronger rate of increase in new orders. The employment sector remained in contraction for the month, but inventories edged lower. The prices index declined by the largest amount for over 5 years and registered the weakest reading since March 2021. The stronger than expected headline figure curbed reservations over the economic outlook and renewed demand for the dollar even though inflation expectations dipped slightly.

The Euro dipped to lows at 1.0125 before a recovery to 1.0150 amid hopes that the September Fed rate hike would be held to 50 basis points.

The dollar as unable to gain further ground on Thursday as commodity currencies held net gains and the Euro traded around 1.0165.




US Treasuries edged lower into Wednesday’s New York open and there was sharper selling after the US ISM data despite moderation in the prices index. The 10-year yield increased to around 2.83% which triggered further dollar buying and highs around 134.50 against the Japanese currency.

St Louis Fed President Bullard stated that he still wants rates to get to 3.75-4.00% this year and that he prefers to front-load rate increases.

San Francisco head Daly reiterated the hawkish stance with comments that the central bank has not completed the fight against high inflation. She added that markets are getting ahead of themselves in pricing in rate cuts for 2023. As far as rate decisions are concerned, she sees a 50 basis-point rate hike as likely in September, but it could be 75 basis points if the Fed sees inflation roaring ahead.

Richmond Fed President Barkin stated that inflation is coming down due to flattening demand. Minneapolis Fed President Kashkari stated that it is very unlikely that the Fed will cut interest rates next year. Market uncertainty persisted with the chances of a 50 basis-point rate hike at close to 60%.

Treasuries rallied later in the session with the 10-year yield declining to 2.76% which sapped dollar support. There was cautious trading in Asia on Thursday with US yields drifting lower again and the dollar retreated to just below 133.50 before recovering to around 134.00 with markets still monitoring Taiwan developments closely.




The final reading of the UK PMI services index was revised slightly lower to 52.6 from the flash reading of 53.3 and confirmed at a 17-month low. Overall business confidence remained subdued and close to 2020 lows while there was a limited easing of inflation pressures.

There was little overall impact from the data with global developments dominating ahead of Thursday’s Bank of England policy decision.

Overall risk appetite held firm which provided some wider UK currency protection, but the UK currency steadily lost ground amid the firm US dollar trend. The UK currency dipped to lows at 1.2100 before a recovery to 1.2140 while the Euro posted a slight recovery to 0.8360.

There are strong expectations that the Bank of England will increase interest rates by 50 basis points to 1.75% with forward guidance from the bank likely to be crucial for Sterling moves. The bank faces a tough trade-off between inflation and growth fears, increasing the risk of a surprise decision.

Sterling was little changed in early Europe as it traded close to 1.2150 against the dollar with very volatile trading inevitable after the rate decision.




Swiss consumer prices were unchanged for July compared with consensus forecasts of a 0.1% decline, although the year-on-year rate was unchanged at 3.4% and slightly below market expectations. The Swiss franc steadily lost ground during the day with a dip in expectations that the National Bank would decide on any intra-meeting move to raise interest rates again. Risk conditions were also relatively stable which limited franc support.

The Euro strengthened to highs above 0.9780 while the dollar strengthened to 0.9650. The franc resisted further selling on Thursday with the dollar around 0.9610.


Technical Levels 




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