The EUR was the biggest faller yesterday, erasing 50% of the gains it made versus USD over the course of this week. Two reasons have been touted. Firstly, the comments made by ECB member Isobel Schnabel suggesting that the eurozone economy was in a worse state than expected, as well as suggestions that the ECB may not be able to keep interest rates higher for longer. Secondly, EU core inflation dropped to 5.3% suggesting that the ECB could pause in their rate hike cycle in September. Core PCE, the Fed's preferred measure of inflation rose as expected to 4.2%, fuelling demand for USD and erasing the previous day’s losses.
GBP beginning to come under pressure as recessionary worries increase. UK house prices fell 0.8% MoM and 5.3% YoY.
* Daily move - against G10 rates at 7:30am, 01.09.23
** Indicative rates - interbank rates at 7:30am, 01.09.23
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As we mentioned earlier this week, the US dollar tends to outperform in September (On average the US dollar has gained 1.28% over the last nine years), so could today's job numbers be the catalyst that begins this move? Markets will need the data to suggest that the job market remains robust and if so, we could see key support levels on GBPUSD and EURUSD taken out to suggest further moves lower, and the start of the dollars ascent.
Elsewhere, China’s ailing economy has prompted further Government stimulus in the form of additional rate cuts, and lowering of mortgage rates.
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