GBP/USD rebounding from 35-month lows.
US ISM manufacturing data was notably weaker than expected in contraction territory and close to 3-year lows which increased fears over the outlook.
The dollar came under significant pressure after the data with a sharp retreat from 2-year highs amid increased speculation over a more aggressive rate cut.
EUR/USD rallied with some support from doubts whether the ECB would push ahead with bond purchases at the September meeting.
After heavy losses in early Europe, Sterling recovered with GBP/USD rebounding from 35-month lows below 1.2000 as parliament took control of business.
US equity markets registered net losses on growth fears, although Asian bourses were resilient and Hong Kong’s market moved sharply higher on political hopes.
Oil prices dipped to 3-week lows on growth fears before a tentative recovery. Precious metals secured fresh gains as the dollar declined with silver posting fresh 35-month highs.
According to sources, the ECB is leaning towards a cut in interest rates at this month’s meeting with enhanced forward guidance and it was likely that rates would also be tiered. Many members also support fresh bond purchases, although the situation was complicated by opposition from Northern countries. The ECB also wanted to leave some room for flexibility and manoeuvre for incoming President Lagarde and the Euro edged higher following the reports.
Sterling moved sharply lower in early Europe with a GBP/USD dip to 5-month lows below 1.2000. The UK August PMI construction index declined to 45.0 from 45.3 and the fourth consecutive monthly contraction. New orders fell at the fastest pace for over 10 years with a slump in confidence, reinforcing concerns, especially with political uncertainty intensifying.
There was notable short covering in New York with a GBP/USD move to near 1.2100 while GBP/EUR rallied. After the New York close, the government was defeated as the House of Commons voted to take control of business and there will be a vote on Wednesday to block any ‘no-deal’ Brexit. The government announced that it would call for a General Election if it is defeated, although the call for now is likely to be rejected by parliament, maintaining deadlock.
Sterling gained some support from a net reduction in concerns over a disorderly Brexit, but severe uncertainty limited currency support. GBP/USD settled near 1.2100 with GBP/EUR around 1.1100 with further political upheaval as well as the services PMI data.
|08:30||EUR German PMI Services(AUG)||54.4||54.4|
|08:45||Markit/ADACI Svcs PMI(AUG)||51.6||51.7|
|08:50||Markit Serv PMI(AUG)||53.3||53.3|
|08:55||EUR German PMI Composite(AUG)||51.4||51.4|
|09:00||Euro-Zone PMI Services(AUG)||53.4||53.4|
|09:00||Euro-Zone PMI Composite(AUG)||51.8||51.8|
|09:30||GBP PMI Services(AUG)||50.2||51.4|
|10:00||Euro - Zone Retail Sales (Y/Y)(JUL)||1.30%||2.60%|
|10:00||Euro - Zone Retail Sales (M/M)(JUL)||-||1.10%|
|12:00||USD MBA Mortgage Applications||-||-6.20%|
|13:30||USD Trade Balance(JUL)||-53.50B||-55.20B|
|13:30||CAD Trade Balance(JUL)||-0.30B||0.14B|
|14:25||FOMC member John C. Williams speech||-||-|
|15:00||CAD BoC Rate Decision||-||1.75%|
|17:30||FOMC Member J. Bullard Speaks||-||-|
|17:30||Fed Bowman speech||-||-|
|18:00||FOMC Member Kashkari Speaks||-||-|
|20:15||Fed President Evans Speaks||-||-|