North American Summary and Highlights 3 September

North American session

The USD saw some early losses as UST yields fell led by a plunge in oil prices due to hopes for an end to supply disruptions in Libya, but the USD losses were subsequently reversed. EUR/USD and USD/JPY were little changed near 1.1040 and 145.60 respectively. GBP/USD came under some pressure, seeing lows below 1.31. AUD/USD was also soft, falling to .6710.

US data had little impact. August’s ISM manufacturing index at 47.2 was up from 46.8 in July but still weak, with the new orders and production indices slipping. July construction spending fell by 0.3% but was slightly firmer net of revisions. 

European morning session

The JPY gained some further ground across the board in Europe and building on the JPY surge in Asia, after BOJ Ueda recommitted to further rate hikes if growth and inflation come in as expected.  The next 10bps hike in the BOJ policy rate is not discounted until the March 2025 BOJ meeting, but traders feel that it could arrive early in October or December.  The quick turnaround in the JPY has also reinforced medium-term bullish JPY sentiment.  

EUR/USD actually saw some small gains for the USD, but this is technical and partially EUR/JPY trades hurting EUR.  The market looks for 25bps from the ECB in September and December and data plus splits on the ECB governing council means that the market is reluctant to discount a 3rd cut before year-end. 

Elsewhere, AUD remained soft after the decline in Asia and a refocus on weaker iron ore prices.