North American Summary and Highlights 23 September
Overview - The USD extended gains supported by strong US PMI data and hawkish Fed talk.
North American session
The USD continued to advance in North America, supported by strong S and P PMIs for September, manufacturing at 57.0 from 53.9 and services at 58.7 from 56.5. This was followed by hawkish comments from Fed Governor Barr looking towards further tightening. The oil price also moved higher, with public comments from Iran at the UN not backing reports of progress being made.
USD/JPY advanced to 158.30 from 158 while EUR/USD fell below 1.14. EUR/GBP advanced to near .86 as GBP/USD fell to 1.3250. USD/CAD reached 1.41 from 1.4080 while AUD/USD edged below .7050.
European session
The dollar stretches its post Fed bid, extending the move on further breaks – EUR/USD following through on the push through 1.1450 to 1.1410/00 support. Cable also down to the 1.3270 Fib level. Fed speaker comments have remained relatively hawkish on strengthening activity and broad inflation, with Oct Fed hike bets currently sitting above 50-50. Short end spread moves have been driving recent action.
Notable though, and overshadowed on the morning, has been the positive surprise from EZ PMI data with composite index up to 53.1 from 52.0, the highest since Apr23, and well above market (51.7), with new orders at 4-year highs. Macro surprise trends and the relative impacts of current oil slippage (if maintained and extended) on policy and performance will remain key further ahead.
On the oil front, Brent front month sitting just below $100. Still background talk of discussion progress and Iran proposal being conveyed through the Qatari mediator, even despite the belligerent Trump speech that caused hesitation on Tuesday, though nothing substantive and imminent new. Market left having to sit and wait out news, though there is obviously a certain window around the UN meet for positive to emerge if they are going to.
UK PMI meanwhile less impressive and still tending to leave sterling somewhat on the backfoot, if in dollar-driven action, with its composite, in contrast, dropping to 51.7 from 52.5 vs market 52, while still well clear of 50.