North American Summary and Highlights 20 August
Overview - The USD moved higher with UST yields supported by economic data and oil prices.
North American session
The USD picked up to end modestly stronger. Firmer oil prices and economic data were supportive, with a very strong August Philly Fed manufacturing index of 47.4 from 41.4, and to a lesser extent a fall in initial claims to 206k from 212k. UST yields picked up, which weighed on equities, even with Treasury Secretary Bessent saying buybacks could be stepped up further.
EUR/USD corrected to 1.1680 after peaking near 1.7110, the EUR seeing modest losses versus GBP but edging higher versus CHF. USD/JPY moved above 159 from 158.50. A recovery in USD/CAD from near 1.3760 could not quite reach 1.38 with optimism persisting for a US-Canada trade deal. AUD/USD was fairly stable.
European session
The dollar remains on the back foot, as EUR/USD squeezed up to be testing the 1.17~ next resistance mark. USD/CAD also making further downward progress (mkt very short CAD, trade deal hopes, higher oil, dollar weak) down to 1.3768 after taking out 1.38. Weak dollar, risk support, and technical also seeing cable still doing well, stretching for 1.3650.
SEK a slight exception, underperforming as the Riksbank left rates unchanged and struck a slightly cautious note (probability of a rate hike later in the year remains but 'considerable uncertainty and developments call for vigilance'). Market pricing of a hike by year end cut back and now around 70% by Dec.
Oil prices continue to leak higher, as US threatens economic consequences for any Iran support as it doubles down on the long-game economic squeeze approach and so ongoing standoff. Brent +$2 to $94. S&P and Nasdaq close to unchanged on the session. Minor corrections for gold/silver after Wednesday’s surges.