North American Summary and Highlights 14 Aug

North American session

US PPI shocked sharply on the upside, with gains of 0.9% overall and ex food and energy, while initial claims fell to 224k from 227k. Fed’s Daly and Musalem argued against a 50bps easing in September, while Bostic saw positive signals from the consumer. With the PPI shock the main story, UST yields and the USD advanced, extending initial gains into the afternoon before a marginal late correction.  

USD/JPY rallied to 147.80 from 146.50 as EUR/JPY rebounded above 172 from 171. EUR/USD fell to 1.1650 from 1.1685 with EUR/GBP sustaining its European losses as GBP/USD fell to 1.3540 from 1.3580. USD/CAD moved above 1.38 and AUD/USD fell to .65 with AUD/CAD slightly softer near .8970.

European morning session 

GBP and the USD made gains through the European morning. EUR/GBP dropped 20 pips to 0.8600 after the UK June and Q2 GDP data came in much stronger than expected at 0.4% m/m and 0.3% q/q respectively. Admittedly, this rise was based on a fresh rise in government spending and a further build in inventories as well as net trade that failed to turn negative after the distorted Q1 jump.  Downside risks still persist for H2 and into next year, but for now GBP will continue to benefit from perceptions of UK outperformance of the Eurozone.  

GBP/USD was only marginally higher at 1.3580 with the USD also making gains through the session, with EUR/USD dropping 20 pips to 1.1680 and USD/JPY 15 pips to 1.4660. AUD/USD dropped 20 pips to 0.6530 and USD/CAD gained 17 pips to 1.3775. 

EUR/NOK edged a little lower after the Norges Bank rate decision, which as expected left rates unchanged, with Norges Bank indicating further scope for easing this year in line with their June statement. But after dipping as low as 11.87 mid-session, EUR/NOK finished only a couple of figures lower at 11.91.