U.S. Dollar Extends Drop to Yearly Lows After Yesterday's Fed Minutes
GBP
GBP/USD has continued its upward momentum, currently trading at 1.3118 (interbank), the highest level since July 2023. GBP/EUR has also risen to 1.1771 (interbank).
The Pound has maintained its gains as the seasonally adjusted S&P Global/CIPS UK Manufacturing PMI improved to 52.5 in August from July's 52.1, surpassing market expectations. Similarly, the Preliminary UK Services Business Activity Index rose to 53.3, beating forecasts, with the Composite PMI also outperforming at 53.4.
The upbeat UK PMI data has bolstered the Pound, reducing market expectations for a BoE rate cut in September.
However, there remains a sentiment that the BoE may still implement another rate cut in November, particularly if inflation stays above the 2% target. Investors are now focused on BoE Governor Andrew Bailey's speech at the
Jackson Hole Symposium tomorrow for any signals regarding the September rate decision.
Today’s Events (GMT+1):
09:30 - UK Composite PMI (Aug) - Actual: 53.4 vs Forecast: 52.9
09:30 - UK Manufacturing PMI (Aug) - Actual: 52.5 vs Forecast: 52.1
09:30 - UK Services PMI (Aug) - Actual: 53.3 vs Forecast: 52.8
EUR
EUR/USD has slightly dipped to 1.1146 (interbank), pulling back from the recent high of 1.11735 reached yesterday, the highest level since July 2023.
Earlier today, the Euro saw a slight decline after a preliminary survey revealed that German business activity contracted in August for the second consecutive month, exceeding expectations.
However, the Eurozone-wide data showed surprising resilience, with the Services PMI climbing to a four-month high of 53.3 in August, and the Composite PMI reaching a three-month peak at 51.2. Despite this, the Eurozone Manufacturing PMI continued its downward trend, hitting an eight-month low.
Market sentiment still leans towards the ECB enacting another rate cut in the last quarter of this year, with expectations that inflation will realign with the ECB’s 2% target next year.
Today’s Events (GMT+1):
08:30 - Germany Manufacturing PMI (Aug) - Actual: 42.1 vs Forecast: 43.4
08:30 - Germany Services PMI (Aug) - Actual: 51.4 vs Forecast: 52.3
09:00 - Eurozone Manufacturing PMI (Aug) - Actual: 45.6 vs Forecast: 45.7
09:00 - Eurozone Composite PMI (Aug) - Actual: 51.2 vs Forecast: 50.1
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09:00 - Eurozone Services PMI (Aug) - Actual: 53.3 vs Forecast: 51.7
USD
The dollar index, which tracks the U.S. dollar against a basket of six major currencies, is up slightly by 0.1% at 101.22, after dipping to 100.92 on Wednesday, its lowest point this year.
The dollar has softened as markets grow increasingly confident that the Federal Reserve is on track for rate cuts starting in September.
The latest Fed guidance came from the July 30-31 meeting minutes, which indicated a strong inclination towards a rate cut in September, with some officials even favouring a reduction in July.
Additionally, U.S. labour data revisions showed fewer jobs were added than initially reported, adding to the narrative for a Fed rate cut.
Today's focus will be on U.S. weekly jobless claims and PMI data. However, all eyes will be on Fed Chair Jerome Powell’s upcoming speech at the Jackson Hole symposium tomorrow.
Today’s Events (GMT+1):
13:00 - Jackson Hole Symposium
13:30 - Initial Jobless Claims - Forecast: 232K
14:45 - Manufacturing PMI (Aug) - Forecast: 49.5
14:45-? Composite PMI (Aug) - Forecast: 53.5
14:45-? Services PMI (Aug) – Forecast: 54.0
CAD
USD/CAD is currently trading at 1.3576 (interbank) in today’s trading session.
The softer Canadian Consumer Price Index (CPI) inflation reports published on Tuesday have triggered the speculation of another rate cut by the BoC.
Traders continue to fully price in a 25 basis points (bps) cut in September, while an additional 50 bps of easing is priced in for the final two meetings of the year.
Oil prices have fallen once with Brent crude declining to $75.95 a barrel, and U.S. West Texas Intermediate crude (WTI) descending to $71.70.
No significant events are scheduled for today
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