North American Summary and Highlights 30 August
Overview -
The USD advanced after subdued core PCE price data, with the income and spending details not seen as soft enough to justify a 50bps Fed easing in September.
North American session
US July core PCE prices were as expected with a 0.2% increase, and subdued at 0.16% before rounding. Personal spending was also as expected with a 0.5% rise but personal income exceeded expectations with a rise of 0.3%, though still below that of spending. The USD advanced on the data which was seen as leaving little justification for a 50bps September easing. The initial USD bounce was partially corrected later in the morning, but the USD saw renewed gains in the afternoon, responding to higher UST yields.
USD/JPY moved above 146 from around 145.30 while EUR/USD fell to 1.1050 from 1.1085. EUR/GBP more than fully reversed European losses. AUD/USD fell to .6765 from .68 with AUD/CAD weaker after Q2 Canadian GDP exceeded expectations with a 2.1% annualized gain. However details showed the data less impressive outside strength in government and a brief dip in USD/CAD was not sustained. USD/CAD saw only marginal gains from around 1.3475 before the data, with two moves above 1.35 failing to hold.
European morning session
The USD had a choppy sideways session in Europe, with the market waiting for the U.S. PCE Inflation data but more importantly next Friday’s U.S. employment report. Though EZ inflation declined to 2.2% Yr/Yr, this was expected and is not seen changing the expected ECB rate path.
GBP did gain some further ground against the EUR however, with the latest UK housing data suggesting a recovery and tempering expectations of a 2nd cut before year end. The view that the UK will ease slower than the ECB is gaining ground. However, traders see some consolidation before a test of the key 0.8383 level on EUR/GBP.