Manufacturing and services PMIs were the talk of the day yesterday. The pound came under pressure after missing the mark on both services and manufacturing results. UK gilt yields fell sharply as a result, as markets pulled back expectations of further interest rate hikes from the Bank of England. Whilst still pricing in a 25 basis point hike in September, markets edged back their peak UK interest rate expectations by 0.25% to 5.75%.
In the Eurozone, services figures also fell miserably, though manufacturing beat expectations in Germany and France, allowing the single currency to hold its ground.
The US also saw softer than expected PMI services and manufacturing data, which caused the dollar to retreat from earlier gains as lower yields encouraged risk-on buying in equities. Stocks were boosted overnight following the incredible results by Nvidia - the US based Artificial intelligence chip manufacturer saw sales more than double.
* Daily move - against G10 rates at 10:30am, 24.08.23
** Indicative rates - interbank rates at 10:30am, 24.08.23
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The key focus is now on the Jackson Hole Symposium, with the US Federal Reserve Chair Jerome Powell due to speak on Friday at the three-day meeting of central bankers beginning today. This afternoon, US durable goods orders are expected to tumble into negative territory this afternoon, which could weaken the dollar.
Currencies are likely to trade in a narrow range ahead of the main event tomorrow at Jackson Hole. The markets will be keen to hear from US Fed Chair Powell, where a well-balanced, data-dependent assessment could provide reason for a retreat in the US dollar. However, if he expresses a more hawkish tone, this could fuel longer term yields to continue to rise and support the dollar further.
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