Europe Summary and Highlights 2 September
The USD moved gently higher in Europe against most majors, with trading thinned due to the U.S. holiday.
Europe Session
The USD moved gently higher in Europe against most majors, with trading thinned due to the U.S. holiday. The mood is for further small gains/consolidation ahead of Friday U.S. employment report, but the view is to test the USD downside if the data is on the weak side – ISM on Tuesday and Thursday also being watched. Last week move is seen as a trimming of USD shorts ahead of a crucial couple of weeks. Traders say a weak U.S. employment report would increase speculation about a 50bps cut on September 18 and hurt the USD, while numbers in line with expectations would likely not produce much FX reaction but would confirm the prospects of a 25bps Fed cut.
The JPY led the losses in thin technical European trading, with the focus on the broader USD trend. However, the multi week mood remains for further JPY gains and more so than on EUR/USD. The sense remains that the big picture JPY rally has not been completed and the market wants to test the 142 level on USD/JPY.
Elsewhere, AFD position as the largest party in one of the German state election has not impacted the EUR, as other parties are expected to form a coalition.