North American Summary and Highlights 12 Aug

North American session

US CPI was as expected at 0.2% overall, 0.3% ex food and energy, though the latter was on the firm side at 0.32% before rounding. The acceleration was led by services, notably air fares, rather than tariffed goods. Subsequent Fed talk was far from dovish, with Barkin stating the balance of risks was still unclear and Schmid saying that restrictive policy was appropriate for the time being. Markets took more notice of a threat from Trump to sue Chairman Powell over the cost of Fed building renovations, which lifted long end yields and helped to extend USD losses, though equities were firm. 

USD/JPY fell to 147.75 from 148.50 while EUR/USD advanced to peak near 1.17 from 1.16 before correcting to 1.1675. EUR/GBP reversed most of its European losses recovering to .8650. AUD/USD rose to .6530 from .6485 while AUD/CAD came close to .90 from .8950.  

European morning session 

GBP gained ground through the European morning, with EUR/GBP down 30 pips to near 0.8620 following the UK labour market data. The data was seen to be slightly on the strong side of consensus, but was quite mixed, with average earnings growth in the ONS data easing to 4.6% in the 3 months to June, and employment falling again in July in the HMRC payroll data. However, the HMRC data showed earnings growth still strong in July at 5.6% y/y, albeit down marginally from June. The ONS data also showed a strong 238k quarterly gain in employment in the 3 months to June, but unemployment also rose 59k. UK front end yields were only up marginally, but GBP gained across the bard, with GBP/USD also up 25pips to 1.3455 despite a generally firm USD. 

USD gains were modest, with EUR/USD down around 10 pips to just above 1.16 and USD/JPY also gaining 10 pips to 148.45. AUD/USD also slightly extended overnight losses to 0.6490. Otherwise, the German ZEW survey was on the weak side of consensus, with economic sentiment dropping to its lowest in 3 months, but still at quite neutral levels.