The Pound was able to draw an element of support as a smaller than expected decline in the UK’s labour-market employment data with overall global risk appetite also holding firm during the day which underpinned the UK currency.
Reports that the EU have offered the City of London an 18-month extension for EU banks being able to clear Euro derivatives in London provided an element of relief and suggested there could be scope for wider compromise. Sterling was again however, unable to hold above the 1.2900 level against the Dollar whilst against the Euro, pushin up towards the 1.09 before retreating during the Asian session. Additional reports coming in after the European close, that the UK are exploring alternative proposals for fisheries which helped somewhat support confidence. There was however, also a warning from a number of US congressmen that there would be no UK-US trade deal if the EU Withdrawal Agreement was broken.
The headline UK CPI inflation rate declined to 0.2% for August from 1.0% previously and fractionally above consensus forecasts. The core rate declined sharply to 0.9% from 1.8%, although above expectations of 0.9%. Market reaction is still currently mutedimited with Sterling currently trading around the 1.2880 against the Dollar and 1.0870 against the Euro.
The New York Empire manufacturing index strengthened to 17.0 from 3.3 previously and above consensus forecasts of 6.6. New orders moved back into expansion territory and shipments increased, although unfilled orders continued to decline. Prices increased at a stronger pace for the month while there was a further small increase in employment. Companies were more optimistic over the outlook with employment projected to increase.
Industrial production increased 0.4% for August compared with expectations of a 1.0% gain, although July data was revised higher.
There was a significant element of position adjustment ahead of Wednesday’s Federal Reserve (Fed) policy decision and the Euro retreated to the 1.1850 area at the European close as the US dollar gained slight support amid a paring of short positions.
The Fedrhetoric will be monitored closely today with forward guidance an extremely important element. The latest individual rate forecasts from individual committee members will also have an impact with projections out to 2023.
The German ZEW economic sentiment index strengthened to 77.4 for September from 71.5 previously and above consensus forecasts of 70.0. There was also an improvement in the current conditions index to -66.2 from -81.3 while the Euro-zone index improved to 73.9 from 64.0 previously.
The Euro turned slightly negative yesterday against the Dollar amid a recovery of the US currency across the board. The greenback managed to trim losses as the pair dropped to around the 1.1830, reaching a fresh daily low.
With the FOMC meeting later today, we could see a slight pause in movement in the pair. As of writing, the Euro is currently trading around the 1.1850 against its US counterpart.
Data to watch
07.00 GBP - CPI
13.30 USD - Core Retail Sales
15.30 USD - Crude Oil Inventories
19.00 USD - FOMC Economic Projections & Statement
19.30 USD - FOMC Press Conference
Posted in Daily Market News on Sep 16 2020