With the US closed for Labor day, markets were very quiet on Monday and remained relatively rangebound in the absence of any market moving news. ECB President Christine Lagarde spoke in London in the afternoon, but gave little away with regards to what the ECB will do next week in the ECB meeting.
Another set of disappointing data from China with services PMI falling more than expected to 51.8, which is the weakest reading since December.
Over in Australia, Governor Phillip Lowe, in his last statement before Michele Bullock replaces him, elected to hold interest rates but kept the door open for additional rate hikes should they be needed. A combination of the weaker China numbers and the RBA has caused AUD to weaken.
* Daily move - against G10 rates at 7:30am, 05.09.23
** Indicative rates - interbank rates at 7:30am, 05.09.23
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Final readings of PMI numbers for August from the UK and Europe are due to be released this morning. Unless we see a big deviation from previous estimates then volatility and the impact on GBP and EUR are expected to be minimal today. US factory orders wil be in focus in the afternoon.
USD has started the day stronger on the back of the weaker-than-expected services numbers from China, as well as higher yields in US treasuries as markets begin to ease rate cut expectations by the Fed next year, i.e. markets are beginning to price in higher rates for longer.
USD is back on the march higher this morning, attempting to break through the highs seen at the start of June on the back of risk aversion as well as rising treasury yields. Should demand for USD continue then we would expect GBPUSD and EURUSD to test the lows seen at the start of June.
Have a great day.
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