Europe Summary and Highlights 20 August

European morning session

EUR/GBP fell 10 pips following the stronger than expected UK July CPI data, which showed both headline and core inflation rising to 3.8% y/y. The initial impact saw EUR/GBP drop 25 pips to 0.8610, but 0.86 remains strong support and the strength in the data was in large part due to the volatile airfares component, so policy implications are limited.

EUR/SEK initially popped slightly higher to 11.20 after the Riksbank left rates unchanged as expected an continued to indicate a likely cut is on the agenda later in the year. But EUR/SEK reversed gains and finished the session 2 figure slower at 11.16. EUR/NOK also fell 3 figures to 11.95.

EUR/USD was marginally firmer after an early dip, and USD/JPY little changed also following an early dip, while AUD and CAD were both slightly softer on the session.

Asia session

The RBNZ has cut as expected by 25bps but is signalling more cuts to come as OCR forecast is being revised lower roughly 50bps lower. It came as a dovish surprise and sunk Kiwi along with it. The biggest surprise, perhaps, is the fact that 50bps are being considered in this meeting, showing the magnitude of concern in RBNZ's eyes. NZD/USD slumped by 1.11% to 0.5827. AUD/USD also 0.14% lower at 0.6445 while USD/CAD is up 2 pips to 1.3871.

The July Japan trade data is disappointing as export fell by 2.6% y/y, so as the 7.5% contraction in import. It seems to suggest tariff is showing a significant impact for export to the U.S. fell by 10%, compared to 3% drop toward E.U. and China. USD/JPY is trading 0.11% lower at 147.51. Else, EUR/USD is down 0.07% and GBP/USD is down 0.09%.