North American Summary and Highlights 4 December
Overview - The USD was stronger in Europe but lost ground after weaker ISM services data. Comments from Powell were however mildly USD supportive while the French government lost a no confidence vote.
North American session
US ADP employment data with a 146k rise was near consensus and generated little response, but the USD did come under some pressure after the ISM services index slipped significantly to 52.1 from 56.0. USD/JPY, already off highs above 151, fell to near 150 while EUR/USD having bottomed at 1.0473 rallied to a high of 1.0544 and GBP/USD moved above 1.27.
The USD did move off its lows later in the day with Fed Chairman Powell expressing dome caution over easing, USD/JPY moving back above 150.50. The French government’s defeat in a confidence motion was not a surprise, but with Powell’s comments helped move EUR/USD back near 1.05.
European morning session
The USD was generally stronger through the European morning, with USD/JPY and AUD/USD leading the way. USD/JPY gained almost a figure to 150.85, and has now more than fully reversed the gains seen on Tuesday after the announcement of Martial Law in South Korea (since rescinded). AUD/USD fell around 30 pips or 0.5% to 0.6410, testing the overnight lows seen after the weaker than expected Q3 Australian GDP data. EUR/USD fell more modestly, just slipping 25 pips to trade slightly below 1.05. Other European currencies were broadly steady against the EUR.
Final Eurozone composite PMI for November was revised up slightly from the preliminary release mainly due to an upward revision to the French data, but both the Eurozone and French data remained significantly weaker on the month.
Sterling fell with EUR/GBP gaining 20 pips to 0.8 after the FT reported BoE governor Bailey as saying the BoE expected four interest rate cuts next year. In the interview, he said that had been the expectation of financial markets when the BoE incorporated them into its most recent economic forecasts. But EUR/GBP returned to opening levels by the end of the morning.