Risk appetite remained fragile as the latest US-China tariffs went into effect on Sunday.
US data releases were mixed on Friday, but the dollar gained net support from a lack of support for European currencies with the dollar index touching 2-year highs.
Risk appetite remained fragile as the latest US-China tariffs went into effect on Sunday with mixed Chinese PMI data failing to trigger a shift in sentiment.
Equities were mixed with Chinese support measures helping to pull Shanghai higher, but most Asian bourses were lower.
EUR/USD dipped to 2-year lows despite some relief over political developments. Sterling was little changed with markets braced for a further increase in political tensions.
Oil prices were undermined by demand concerns and reports of higher than expected Russian production. Precious metals edged lower on a firm dollar, although with solid underlying support.
The Euro failed to gain any traction from relief from Italian politics even though the Democrats (PD) and 5-Star reached agreement on a new government. A EUR/USD drop below the key 1.1000 level triggered fresh stop-loss selling with 2-year lows near 1.0975. President Trump strongly criticised Fed policy again while also complaining that the Euro slide was undermining US competitiveness. Administration and Fed rhetoric will be watched closely with Chair Powell due to speak on Friday.
UK July net consumer lending increased £5.5bn, above consensus forecasts of £4.6bn and mortgage lending also beat market expectations which curbed pessimism over the consumer spending outlook, although there was little market reaction.
A Scottish judge denied an emergency in junction to block the proroguing of parliament, but there will be further hearings in the week ahead. GBP/USD failed to hold above 1.2200 given a strong dollar, although GBP/EUR rallied to near 1.1080.
CFTC data again showed only a small decline in short, non-commercial positions with the overall positioning close to 2-year highs, maintaining the scope for sharp short covering if sentiment improves.
Political tensions continued to increase over the weekend with reports that Conservative MPs would face draconian sanctions if they don’t support the government’s Brexit line. Immediate reaction was muted with GBP/USD trading around 1.2170, but choppy trading is inevitable during the week with the House of Commons returning from recess on Tuesday.
|07:30||CHF Retail Sales (Y/Y)(JUL)||-||0.70%|
|08:45||Markit/ADACI Mfg PMI(AUG)||-||48.5|
|08:50||Markit Mfg PMI(AUG)||50||50|
|08:55||EUR German Manufacturing PMI (M/M)(AUG)||-||-|
|09:00||Euro-Zone PMI Manufacturing(AUG)||46.4||46.4|
|09:30||GBP PMI Manufacturing(AUG)||-||48|