North American Summary and Highlights 1 Feb

North American session

The USD fell back across the board through the North American session, with EUR/USD gaining around 70 pips and USD/JPY losing 70 pips, while GBP/USD was the best performer, gaining a big figure to 1.2750. 

The USD suffered from another rise in initial and continuing claims, and further declines in US yields, despite a stronger than expected ISM survey of 49.1, where both new orders and prices paid saw significant gains above neutral. Lower than expected unit labour costs for Q4, up only 0.5% annualized, worries about the US banking sector, and lower oil prices also contributed to the decline. UST yields came off the lows later in the session, but only USD/JPY saw a significant correction.

GBP strength was helped by the Bank of England statement, which, although it removed the bias to tighten, still indicated that the current market pricing of a relatively hawkish Bank of England (compared to the Fed and ECB) was in line with its thinking. 

European morning session

The USD was little changed against the EUR and JPY in the European morning, but saw some modest gains against GBP and SEK. EUR/GBP rose around 20 pips to 0.8545, while EUR/SEK gained 5 figures to 11.29. The Riksbank meeting was the main news of the morning, with the decision seeing no change in rates as expected, but the statement indicating the possibility of an H1 rate cut and a more dovish view than seen at the November meeting. 

Otherwise, Eurozone CPI was marginally higher than expected at 2.8% headline, 3.3% core, while the Eurozone unemployment rate was unchanged at 6.4% and the final manufacturing PMI unrevised at 46.6. The UK manufacturing MI was revised down slightly to 47.0 from 47.3.