US Dollar Recovery Slows Ahead of High-Stakes Philly Debate

Impact on GBP:

Sterling gains on upbeat UK job growth

The Pound Sterling (GBP) edged slightly higher against its major counterparts today, following a mixed UK employment report for the three months ending in July. GBP gained strength as the Office for National Statistics (ONS) reported strong labour demand, while wage growth slowed in line with expectations.

The ILO Unemployment Rate dipped to 4.1% from the previous 4.2%, and UK employers added 265K new workers, significantly higher than the previous 97K. Despite robust job growth typically encouraging hawkish Bank of England sentiment, this may not be the case as wage growth (a?key driver of inflation in the services sector) decelerated. Average Earnings Excluding Bonuses matched expectations at 5.1%, down from 5.4%, while wages including bonuses fell more sharply to 4%, easing pressure on the BoE to raise rates further.

GBP/USD recovered toward $1.3100 after these figures from the multi-week low it touched near $1.3050 earlier in the day.

No Major Data

Impact on EUR:

Draghi's policy proposals fall short of market expectations

The main event of yesterday's European session was Mario Draghi's release of his report, 'The Future of European Competitiveness'. His proposals, including a significant call for joint EU debt issuance to fund the estimated €800bn annual investment needed for the EU to compete with the US and China, will be closely analysed for a long time. However, northern European nations and populist governments are likely to resist these debt-sharing plans, and markets are unlikely to react until the EU considers these ideas in future budgets.

Meanwhile, EUR/USD remains stable ahead of Thursday's ECB meeting, with a possible dip towards $1.1000 today as investors react to weak Chinese demand data and strong US credit figures.

No Major?Data

Impact on USD:

High stakes showdown in Philadelphia

FX markets are holding steady within ranges as they await new developments.?

On the US front, the economic calendar is light, with only the NFIB small business optimism report. Yesterday's strong consumer credit data for July underscores the resilience of US consumers, potentially limiting the Federal Reserve’s case for a 50bp rate cut this month. The focus shifts to tomorrow's presidential debate between Kamala Harris and Donald Trump. With the race tight, a decisive debate outcome could prompt FX markets to adjust positions in anticipation of the November election.

Expect a quiet day in FX trading ahead of the debate.

No Major Data

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