Dollar continues to flex its muscles

Market reports
Thanim Islam
  • GBPUSD and EURUSD at 3-month lows
  • EUR continues to weaken
  • US Services due today


USD continued to push on stronger with EURUSD and GBPUSD marking new 3-month lows. The USD index is now at the strongest for 5 months following the disappointing services numbers and higher US treasury yields, after US factory orders didn’t drop as much as expected. On the data front, final readings European PMIs in August came in lower than previous estimates, which weighed on the single bloc currency. UK PMIs however came in higher than previous estimates, supporting GBP across the G10.

UK Chancellor of the Exchequer Jeremy Hunt announced yesterday that there will be an Autumn Statement on November 22nd which will see a new set of economic forecasts prepared by the Office for Budget Responsibility.


Market rates

* Daily move - against G10 rates at 7:30am, 06.09.23

** Indicative rates - interbank rates at 7:30am, 06.09.23

Data points


  • USD: Fed Collins
  • GBP: BoE Bailey

Our thoughts

The EUR seems to be in the crosshairs of the market at the moment on the back of stagflation fears, as well as continued concerns over China’s economy. We highlighted previously the EUR index broke the year long uptrend, and this technical break seems to be encouraging markets to continue to sell the EUR. The weakness on EUR is seeing EURUSD at 3-month lows, and GBPEUR back up to trading near the 2023 high, and before that back near the highs seen in September 2022. We remain weary of additional EUR weakness in the short term.

Services PMIs from the US will be out today from data agency S&P and ISM. Data that supports the US soft landing narrative should continue to make USD stronger. We also have the release of the Fed’s Beige book, where we would expect the Fed to reaffirm the higher rates for longer narrative.

For GBP, Governor Bailey will be testifying in front of UK parliament.

Chart of the day

As mentioned above GBPEUR is back on the up as the EUR continues to be at the mercy of the markets. As can be seen in the chart below, the 2023 highs have been tested three times without any follow-through, suggesting markets are seeing this level as good value to buy EUR. But could we see a break above? Positive news from the UK could be the catalyst of any such breakthrough.

Source: Bloomberg Finance L.P.

Have a great day.


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