August manufacturing PMI’s fell to a 7-year low of 47.4, below consensus forecasts. New orders saw the sharpest decline since mid-2012, exports orders suffering pressure and business sentiment also dropped to record lows. Sterling fell in advance of the data and remained under pressure as confidence in the economic outlook weakened further.
The House of Commons returns from recess today and opposition parties are expected to table a motion to force the government to request another Brexit extension if there is no deal agreed by late October. Boris Johnson warned that there would be a general election if the government lost today’s vote as political uncertainty and tensions continued to intensify. Overnight, BRC retail sales data was poor with an annual 0.5% August decline
Sterling opens at 2-year lows of 1.2000 against the Dollar while the Euro tested resistance below 1.0990. High volatility is inevitable today.
There were no major US developments with US markets closed for holiday and attention tended to focus on Hurricane Dorian as it approached Florida. The dollar overall maintained a strong tone with the Euro sliding to lows just below 1.0960 as trading ranges remained narrow.
Although there were no significant positive dollar developments, the US currency continued to gain by default given a lack of confidence in other major currencies. In this context, the dollar pushed to fresh 2-year highs on Tuesday with the Euro and Pound declining to fresh 2-year lows near 1.0930 and 1.1970 respectively as political concerns contributed to a lack of confidence.
The Euro is currently holding around the 1.0937 level amid a firmer Dollar to start Tuesdays trading session which could potentially see sellers threaten a break down to the lows of 1.0900 or 1.0850s. If sellers manage that this week, it opens up a slippery slope for the pair ahead of the ECB monetary policy decision on 12th September next week.
The solid momentum in the Dollar remains the key driver behind the down move in spot to levels last seen in May 2017, while declining yields in Germany, poor results from data releases in Euroland and Brexit concerns have been also adding to the generalized offered bias in the Euro.
Later this morning, Producer Prices Index in the Euro bloc is the only release for today.
Data to watch
10.00 EUR - PPI
15.00 USD - ISM Manufacturing PMI
22.00 USD - FOMC member Rosengren Speaks
Posted in Daily Market News on Sep 3 2019