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ECB council member Schnabel stated that the inflation outlook had not improved and it was possible that there would be a further increase in the short term. In this context, there were expectations that she would back another rate hike at the September meeting but the Euro was unable to make any significant headway.

The Philadelphia Fed manufacturing index strengthened to 6.2 for August from -12.3 the previous month and significantly above consensus forecasts of -5.0. The new and existing orders components remained in contraction territory, but there was a net improvement for the month while shipments maintained strong growth. There was a solid increase in employment and the average work week while delivery times lengthened slightly.

There was an easing of cost pressures with a slower rate of increase in prices paid to the lowest level since December 2020. The prices received index also dipped to the lowest reading since February 2021. Companies were less optimistic over the outlook with a negative reading for the third successive month while cost pressures are expected to ease slightly. The data overall provided significant relief after the very weak New York survey earlier in the week.

Initial jobless claims declined slightly to 250,000 in the latest week from 252,000 and below consensus forecasts of 265,000 while continuing claims edged higher to 1.44mn from 1.43mn. The dollar secured a limited net advance after the data with European currencies under pressure. This selling continued into the European close with the Euro dipping below the 1.0100 level. The dollar maintained a strong tone on Friday with the Euro just above the 1-month lows of 1.0070 posted earlier.




US existing home sales declined to an annual rate of 4.81mn from 5.11mn the previous month and below consensus forecasts of 4.89mn. There was choppy trading in Treasuries after Thursday’s US open with a small net decline in the 10-year yield. The dollar failed to break above 135.50 and edged lower in relatively tight ranges.

San Francisco Fed President Daly stated that a rate hike of 50 or 75 basis points would be acceptable at the September meeting. She added that she wants a raise and hold strategy which suggests a lower peak, especially as she also warned that she didn’t want to tighten more than necessary.

St Louis Fed President Bullard stated that he preferred a 75 basis-point rate hike at the September meeting. Kansas City Head George stated that financial conditions have eased due to expectations that the Fed will slow down, but this does not represent hoe the Fed is thinking. Minneapolis Head Kashkari considered that it would be difficult to avoid a recession given the need to curb demand. The overall tone was a protest against market expectations.

The hawkish rhetoric helped spark renewed dollar buying with gains to near 136.00. The Chinese central bank continued to push the yuan weaker on Friday which contributed to the strong dollar tone and the US currency advanced to highs close to 136.40 against the yen before a slight correction.




Sterling was subjected to renewed selling after Thursday’s European open and briefly dipped below the 1.2000 level against the dollar. Traders were, however, unable to trigger a sustained break below this level which generated an element of short covering and recovery back above 1.2050 at the New York open. A more stable risk tone helped underpin the UK currency, but the recovery stalled quickly amid underlying fears over the European economic outlook.

According to the latest ONS data, consumer spending on credit and debit cards declined sharply in the latest week, maintaining underlying concerns over the outlook.

The Bank of England stated that it is aiming to unwind fully the stock of corporate bond purchases by the end of 2023 or early 2024. Sterling Selling pressure returned into the European close with a more decisive break below the 1.2000 level against the dollar and lows below 1.1950 while the Euro advanced to around 0.8445.

UK consumer confidence slid to a fresh record low for August, but there was a slightly stronger than expected retail sales report with a 0.3% increase for July compared with expectations of a small decline. Sterling was unable to gain any significant relief as it traded just above 1.1900 against the dollar with the Euro around 0.8460.




After losses during the previous two days, the franc recovered some ground against the Euro on Thursday with the single currency retreating to around 0.9660. The franc was underpinned resilient despite a limited net advance in European equity markets.

The dollar posted net gains to near 0.9550 amid wider US gains. Expectations of a hawkish Fed policy and further sizeable ECB rate hike in September limited the scope for franc gains and the dollar advanced further to near 0.9590 on Friday as global developments dominated.


Technical Levels 



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