North American Summary and Highlights 29 Aug
Overview - The USD opened the North American session firmer but was unable to sustain it gains.
North American session
After a positive start the USD slipped during the North American session to end marginally lower. The first round of data had little impact, with July core PCE prices at 0.3%, personal income at 0.4% and spending at 0.5% all on consensus, though July’s advance goods trade deficit at $103.6bn from $84.9bn was significantly wider than expected. A weak August Chicago PMI of 41.5 from 47.1 and downward revision in the 5-10 year inflation view to 3.5% from 3.9% in the final August Michigan CSI helped fuel the USD’s subsequent slippage.
EUR/USD rise to near 1.17 from 1.1650 while USD/JPY slipped to near 147 from 147.40. GBP/USD rose to near 1.35 from 1.3450. and AUD/USD rose to near .6550 from .6525. A 1.6% annualized decline in Q2 Canadian GDP lifted USD/CAD to 1.3780 from 1.3750 but slippage to 1.3735 followed. AUD/CAD gains on the data failed to breach .90.
European morning session
The USD was mixed in the European morning session. GBP was the biggest mover, with EUR/GBP rising 25 pips on speculation that the government might tax bank reserves at the Bank of England, sending bank shares lower.
The SEK made modest gains against the EUR, with EUR/SEK falling a figure to 11.06 helped by stronger than expected Swedish Q2 GDP data, which was revised up to 0.5% q/q from the 0.1% preliminary data.
Otherwise markets were generally quiet. EUR/USD gained 5 pips and USD/JPY also gained 5 pips, with AUD/USD and USD/CHF slipping around 10 pips. German retail sales early in the session were weak in July, falling 1.5% m/m, but had no market impact. The EUR gained a little ground mid-session after stronger than expected German state CPI data, although there is unlikely to be any impact on ECB policy, with French, Italian and Spanish CPI coming in on the soft side of consensus.