Fears over the domestic outlook and weaker risk appetite continued to undermine Sterling.

The US ISM manufacturing index was unchanged at 52.8 for August and above consensus forecasts of 52.0.

The orders component moved back into expansion territory for the month, although production growth slowed to a crawl while inventories posted a smaller decline.

Employment also moved back into expansion for the month with a significant net gain.

There was a sharp slowdown in the prices index to 52.5 from 60.0 which was well below expectations and the lowest reading since July 2020.

US Treasuries continued to lose ground ahead of Thursday’s New York open and there was no relief after the US open with the 10-year yield increasing to 2-month highs around 3.28% before a slight correction.

The dollar posted further net gains against the yen on Thursday as overall yield spreads boosted the US currency.

Japanese verbal intervention had no impact as yield spreads dominated and USD/JPY posted a fresh 24-year high at 140.40 in Asia on Friday.

Swiss consumer prices increased 0.3% for August with the year-on-year inflation rate edging higher to 3.5% from 3.4%.

The National Bank will remain uneasy over underlying inflation pressures.

The latest US employment report is due on Friday. Consensus forecasts are for an increase in non-farm payrolls of just under 300,000 after a 528,000 increase for July with the unemployment rate expected to remain at 3.5%.

Average hourly earnings will be important for inflation expectations and are forecast to increase 0.4% on the month with a 5.3% annual increase.

There were no major Euro-Zone developments during Thursday. Markets continued to fret over energy security for the region as the Nord-Stream pipeline remained closed. Speculation over a 75 basis-point ECB rate hike next week provided some Euro protection.

High yields continued to boost the dollar. EUR/USD dipped sharply to lows at 0.9915 before a recovery to above 0.9950.

Yield spreads continued to undermine the yen. USD/JPY broke above 140.00 for the first time in 24 years and held above this level.

The Swiss franc regained some ground amid weaker equities. EUR/CHF dipped to 0.9770 with USD/CHF unable to hold above 0.9850.

Fears over the domestic outlook and weaker risk appetite continued to undermine Sterling. GBP/USD posted fresh 30-month lows at 1.1500 before a very limited correction towards 1.1550.

Commodity currencies were subjected to renewed pressure on dollar strength and vulnerable risk conditions. Weaker oil prices undermined the Canadian dollar with USD/CAD peaking at 6-week highs above 1.3200 before a correction to 1.3160. AUD/USD dipped to 6-week lows below 0.6800 and was held below this level on Friday.

Economic Calendar

13:30USD Average Hourly Earnings m/m0.50%0.40%
13:30USD Non-Farm Employment Change528K295K
13:30USD Unemployment Rate3.50%3.50%

*All rates shown are indicative of interbank rates and should only be used for indication purposes only. It is important to note that foreign exchange rates fluctuate and that rates may vary depending on the amount and the base currency that is purchased or sold. Rates are correct as of 8:00am UK time. CentralFX are not responsible for the rates shown.