North American Summary and Highlights 5 Feb

North American session

The USD extended its gains in North America, supported by UST yields, particularly after a stronger than expected ISM services report, the headline rising to 53.4 from 50.5 and prices paid to 64.0 from 56.7. Comments from Fed’s Kashkari seeing the Fed having scope to wait before easing backed the message of Powell’s weekend comments though dove Goolsbee would not rule out a March easing.

USD/JPY rose as far as 148.89 and EUR/USD fell as low as 1.0723 before modest corrections, the EUR seeing more of a recovery than the GBP as EUR/GBP rose to .8570. While equities saw early weakness fade UST yields remained high, limiting the size of the USD move off its lows. The Fed’s quarterly survey on bank lending practices showed fewer tightening standards than in Q4.

European morning session

The USD continued to advance through the European morning, with EUR/USD dropping around 30 pips to 1.0750, while USD/JPY rose more modestly, gaining just 10 pips to 148.45. The USD was also stronger against the other riskier currencies, but the EUR lost a little ground on the crosses against GBP and the CAD, but gained around 3 figures against the SEK. 

There wasn’t a great deal of news of any note, with final Eurozone composite PMI unchanged from the preliminary, but the UK composite revised up on the back of services strength. Eurozone PPI fell 0.8% as expected in December, while the German trade surplus was larger than expected at EUR22.2bn in December due to very weak imports. The Eurozone Sentix investor confidence index continues its improvement, hitting its best level since April.