North American Summary and Highlights 3 September
Overview - The USD slipped initially led by USD/JPY but more broadly in North America led by dovish comments from Fed’s Waller.
North American session
Equities got a lift and UST yields fell after comments from Fed’s Waller suggesting he could back keeping rates on hold in September if August inflation data continued encouraging signals from recent releases, while also suggesting strong data could prompt a rate hike. The USD moved lower with USD/JPY losses extending to around 155.50 before stabilizing. EUR/USD saw highs near 1.1640, while GBP/USD rise to near 1.3540 from 1.35 as EUR/GBP erased earlier gains, as did EUR/CHF. USD/CAD fell below 1.38 and AUD/USD rose to 0.72.
US data was largely overshadowed by Waller’s comments. July’s trade deficit rose to $88.6bn from $71.2bn but was a little narrower than expected supported by revisions to services. Initial claims remain low at 206k from 204k while revisions to Q2 productivity and costs were marginal. Later August’s ISM services index of 55.4 from 54.1 was stronger than expected, with prices paid at 72.6 from 70.3, reaching their highest since August 2022.
European session
USD/JPY long liquidation gathers further steam with the pair back to just short of 156.
30yr JGBs come off around 10bp into and out of a solid auction. Market taking note of BoJ rates shift and potential for real money local demand if bond stabilise at these more attractive levels. These the broad considerations hitting a market caught long into the initial exporter and spec covering supply earlier in the week.
Swiss CPI comes in firmer than expected at 0.8%y/y from 0.4% vs market of 0.5%, stemming the recent tide on the CHF on the day, if still substantially lagging the yen (so net still rotation). EUR/CHF had got overbought on the push to the 0.9455 Fib and back at 0.9390~ now. USD/CHF pulls back from the 0.8150 resistance hold of yesterday, off around ½ % to 0.8090 today.
EUR/USD remains close to the 1.16~ figure that continues to hold sway with options expiries stacked on and around the figure all week into payrolls.