Europe Summary and Highlights 5 September

Europe Session

The JPY remains the key focus in the FX market, with European trading seeing a small JPY pullback after the rapid gains over the past few sessions.  Weak U.S. JOLTS data has fuelled Fed rate talk, while the Japan real wage numbers were higher than expected and added to BOJ hike talk – though a 10bps hike is only fully discounted January 2025. Wait now for initial claims/ADP and ISM services, before payroll.  Traders feel we could get some more profit-taking on JPY shorts to avoid being whipsawed if US payrolls is not weak.

Other majors have been left behind somewhat, with little movement in Europe ahead of the U.S. data deluge.  However, a subtle divergence remains this week between commodity currencies and EUR/GBP/CHF/Scandis.  Traders say commodity currencies have failed to benefit from weak USD data, as it has been more than counterbalanced by lower oil prices (higher OPEC+ production fears) and weak base metals (China gloom spreading further).