North American Summary and Highlights 31 August
Overview - The USD saw a modest correction from its sharp Friday spike, led by EUR/USD.
North American session
Fresh conflict in the Middle East saw UST yields and oil higher with equities lower. There was little data, though August’s Chicago PMI slipped below neutral before being offset by a stronger Dallas Fed manufacturing index.
The USD maintained its corrective slippage seen in Europe, EUR/USD leading, pushing through 1.16 and getting close to 1.1620. EUR/CHF and EUR/GBP were marginally firmer, with a GBP/USD move above 1.3560 failing to persist. USD/CAD slipped to 1.3960 from 1.3990 but AUD/USD gains were marginal. USD/JPY was also fairly steady near 159.75.
European session
The USD lost a little ground in Europe, a mild correction to Friday’s USD surge. Nevertheless, the USD tone remains constructive, with Warsh’s Jackson hole speech seen to mean a high probability of a September FOMC hike. USD/JPY has also been stabilized multi day by U.S. Treasury Bessent appearing to suggest that JPY support is now up to Japan and the BOJ. GBP is seen to be a laggard with BOE Bailey at Jackson Hole suggesting that 2nd round inflation effects are still low from the Iran war and dampening BOE rate hike fears.
EUR/USD views are a little more mixed. Last week’s ECB monetary accounts reinforced expectations of a 25bps ECB hike on September 10 and some ECB board members pushing for a 3rd hike later in the year.