North American Summary and Highlights 1 September

North American session

The USD saw some modest early slippage but ended firmer with focus on rising oil prices as the US made renewed strikes on Iran. The morning saw Fed’s Barr state that he needed confidence that inflation was on a path to 2% to prevent a tightening but he left the September decision open. August’s ISM manufacturing index slipped to 54.6 from 55.6 while July job openings increased by 89k, a ruse offset by a downward revision to June, to -355k from -178k.

After a brief dip below 160 USD/JPY picked up to 160.20. EUR/USD failed to hold a bounce above 1.16 and returned to 1.1590. The EUR did advance versus GBP and CHF. USD/CAD rise to 1.39 from 1.3880 though AUD/USD held above European lows near 0.714.

European session

Minor chop continues since the dollar was marked up post Warsh, dollar a touch firmer and EUR/USD pulling back on Monday’s minor corrective bounce. Sitting around big figures references with USD/JPY around 160 and EUR/USD 1.16~. 

Indeed, latter seen having a lot of expiries at and clustering either side of 1.16 this week which might tend to keep things compressed into the key US payrolls data release unless some more impulsive incentives kick in prior, around bonds/risk, or geopolitics (latter seeing the first missile exchanges in more than a month of course). 

On the bond front, yields continue to press the highs, with JGBs seeing 10yrs hit 3% for the first time in 3 decades and other majors also stretching their current highs. Eying risk sensitivity to that, S&P future current off around ½ %, Nasdaq off around 1%.

EZ HICP rises to 3.3% from 2.9%, in line with market expectations, and seen cementing the Sep ECB hike (virtually 100% priced in). Details nuanced - core slipped to 2.4% from 2.5%, while ex processed food and energy at 2.1% from 2.2% (mkt 2.3%). Interesting to note an ECB Blog today argue that energy has driven largely all of the current inflation upswing and therefore a measured policy response appropriate.