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The final August reading for the Euro-Zone services-sector PMI index was revised down to 49.8 from the flash reading of 50.2 which pushed the sector into contraction territory and the composite index was also below the 50.0 level. Spanish data was weaker than expected, although the Italian reading beat market expectations and edged back into expansion territory. Cost pressures eased slightly, but remained intense in historic terms.

The Euro-Zone Sentix business confidence index declined further to -31.8 for September from -25.2 previously which was weaker than the expected reading of -27.5 and the weakest reading since May 2020. According to Sentix, the economic situation in the Eurozone clearly deteriorated again. It added that signs in Europe have been pointing to a considerable recession for some time and it added that there are now increasing signs of a corresponding development at the global level.

Tight ranges prevailed in European trading with limited activity on the Monday following a US jobs report amplified by the US Labor Day holiday.

Euro gas prices retreated from intra-day highs which provided marginal relief and there was some reluctance to sell the Euro ahead of Thursday’s ECB policy meeting.

The Euro managed to move back above the 0.9900 level, but failed to gather any significant traction and settled around 0.9925. Gazprom stated that flows through Nord-Stream will not be able to resume until Siemens repairs faulty equipment, reinforcing fears over the Euro-Zone outlook.  The Euro was, however, able to make further limited headway on Tuesday amid short covering and traded just above 0.9950 against the US dollar in early Europe.




Treasury markets were closed for the Labor Day holiday on Monday, but futures edged lower in electronic trading and higher yields underpinned the dollar against the Japanese currency. US equity futures also held small gains and the dollar was able to edge higher to trade just above 140.50 towards the European close.   

China’s central bank announced that it was cutting the foreign exchange reserve requirement ratio to 6% from 8% which should tend to curb yuan selling pressure.

Japanese Finance Minister Suzuki stated that forex moves were being monitored with a sense of urgency and recent volatility had been high. There was, however, little impact on the yen with markets sceptical that there would be any actual intervention to support the Japanese currency.

Markets will remain on alert for comments from Federal Reserve officials with Chair Powell set to make an important speech on Thursday.

The yen overall remained firmly on the defensive with the dollar at fresh 24-year highs just above 141.00 in early Europe with the Euro advancing to near 140.40.




The final reading for the UK services-sector PMI index was revised down to an 18-month low of 50.9 for August from the flash reading of 52.5 and the composite index also dipped below the 50.0 level. Overall business confidence remained weak with further concerns surrounding the impact of a surge in energy prices.

Truss was confirmed as the winner in the Conservative leadership contest, although the margin of victory was narrower than expected which may limit authority.

Markets will be watching the Cabinet appointments and, importantly, details of an energy package which are expected to be unveiled later this week.

Sterling edged above 1.1500 against the dollar on short covering with some support as global risk appetite also attempted to stabilise. Overall Sterling sentiment was, however, still very fragile given fears over the outlook.

Bank of England Monetary Policy Committee member Mann stated that a drift in medium-term inflation expectations was already apparent. She added that it was better to act forcefully and fast to keep expectations in check rather than adopting a gradual approach and maintained a hawkish policy stance.

Sterling settled just above 1.1500 against the dollar with the Euro retreating to around 0.8620. The UK currency rallied on Tuesday amid increased speculation that Truss would announce a very substantial fiscal package to freeze energy prices. Sterling traded above 1.1550 against the dollar with the Euro around 0.8600.




Swiss GDP increased 0.3% for the second quarter with year-on-year growth slowing to 2.8% from 4.7% and slightly below consensus forecasts of 3.0%. Swiss sight deposits were unchanged at CHF752.8bn in the latest week which suggested that the National Bank had not been intervening to curb franc support.

The Euro edged lower during the day with losses to 0.9730 while the dollar drifted lower to the 0.9800 area.

There was little change on Tuesday with the Euro nudging higher while the US currency traded just below the 0.9800 level as risk appetite held steady.


Technical Levels 



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