North American Summary and Highlights 18 July

North American session

There was little FX reaction to the ECB decision to leave rates unchanged as expected with the statement fairly neutral. US data was mixed with initial claims bouncing to 234k from 223k though but an unexpectedly strong July Philly Fed index of 13.9 from 1.3, also generating little response, though with the claims rise seen influenced by Hurricane Beryl the Philly Fed may have been more significant. ECB’s Lagarde said that risks to growth were on the downside and the September decision was wide open.

AS the session built the USD saw broad based gains, particularly in late trade when UST yields picked up. EUR/USD fell below 1.09 from 1.0935 with post-ECB dips in EUR/GBP and EUR/CHF reversing. EUR/JPY made modest gains as USD/JPY rose from near 156.50 to 157.40. Equities were weaker and AUD/USD slipped to .67 from .6740 while USD/CAD rose to 1.3715 fr9om 1.3680. 

European morning session

The USD was modestly stronger through the European morning, recovering some of the losses against the JPY seen overnight, with USD/JPY bouncing around 40 pips to 156.45. EUR/USD fell more modestly to 1.0930, while GBP/USD slipped back 20 pips to 1.2990. 

The main news of the morning was UK labour market data, which was broadly in line with expectations. UK average earnings growth in the 3 months to May was 5.7% as expected, although the May data itself as weaker at 5.1%. The more up to date HMRC data showed a big drop in the y/y rate in June to 3.2% y/y, but most of this was due to a base effect although the monthly data was also slightly soft at -0.4% m/m. The employment data was a bit stronger than expected, with the May payroll numbers from the HMRC revised up to 51k from -3k. GBP was slightly weaker after the data, with EUR/GBP rising 10 pips to 0.8415.