- GBP/USD through the 1.30
- EUR/USD within a tight range around 1.1920
- Dollar hit by concerns over North Korea, rates outlook
- Aussie, kiwi hold steady; Australian GDP disappoints
GBPUSD 1.3044 GBPEUR 1.0919 EURUSD 1.1944 USDCAD 1.2374 GBPINR 83.67 GBPAUD 1.6322 GBPAED 4.7907
- GBP/USD is trading at 1.3037, up 0.79% on the day, having posted a daily high at 1.3044 and low at 1.2909. GBP/USD was better bid on the day despite poor data from the UK economy that shows after a poor H1, the economy still is not improving. The UK Markit services PMI for August arrived in at 53.2, and below the 53.8 prior. US Factory Orders in July declined 3.3%, matching the estimate. Still, the tumble marked the sharpest decline since August 2014. Federal Reserve member Lael Brainard spoke earlier in the day, and two other FOMC members, Neel Kashkari and Neel Kashkari, will be delivering remarks later in the day. Today, nevertheless, the main focus remained with the US dollar and whether or not the N.Korean situation will escalate to a war, dovish Fed talk and calculating the damages to the US economy from the storms.
- The single currency is trading almost unchanged vs. the greenback on Wednesday, with EUR/USD hovering over the 1.1920/30 band ahead of the opening bell in Euroland. Spot is struggling to extend the positive start of the week after two consecutive daily advances and despite the softer tone from US yields, where the key 10-year benchmark dropped below 2.06% on Tuesday, levels last seen in early November. In addition, the likeliness of a dovish tone by President Draghi at his press conference tomorrow is also limiting the upside. In fact, expectations of some announcement regarding the ECB’s QE programme (‘taper’) have drastically diminished in recent weeks due to the strong appreciation of the single currency. In that regard, analysts at Danske Bank suggested: “The main focus at the ECB meeting is likely to be how big a problem the current pace of euro appreciation is for the ECB. We expect Mario Draghi to express concern about this and explicitly mention that the stronger euro is the main reason the ECB has lowered its inflation projection and that there is further downside risk”.
- The dollar remained lower against a basket of the other major currencies on Wednesday amid heightened tensions in the Korean peninsula and fresh doubts over the outlook for higher U.S. interest rates.The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was at 92.23 by 03:51 AM ET (07:51 GMT). Investors remained on edge after South Korea’s President Moon Jae-in warned that the crisis on the Korean peninsula risks becoming “uncontrollable”, following Sunday’s nuclear test by North Korea. The dollar was weaker against the safe haven yen, with USD/JPY last at 108.66 after touching an overnight low of 108.50, not far from the four-and-a-half month trough of 108.26 set last Tuesday. The dollar was near one-week lows against the Swiss franc, with USD/CHF at 0.9547. The Swiss franc and the yen are often sought in times of geopolitical tension or market turbulence because both countries have large current account surpluses. The dollar was also pressured lower after comments by a Federal Reserve official on Tuesday revived doubts over prospects for a third rate hike this year. Fed governor Lael Brainard said the U.S. central bank should be cautious about raising interest rates amid the economy’s “persistent failure” to reach its 2% inflation target. Expectations that rates will remain on hold, compounded by political turmoil in Washington have driven the dollar index down around 10% so far this year.