Sterling was little changed with fragile risk appetite offsetting strong wages growth.

Narrow ranges tended to prevail on Monday with low trading volumes. Risk appetite stabilised later in the day, although there were fresh reservations over coronavirus developments in Asia on Tuesday after a reported case in New Zealand.

US bond yields remained lower on the day with the 10-year yield around 1.25%. Wall Street equities pared losses with net closing gains, but futures edged lower on Tuesday. Asian equity markets posted significant losses.

The dollar secured a limited net advance amid an element of defensive demand. EUR/USD was again blocked at 1.1800 and retreated to around 1.1765. Sterling was little changed with fragile risk appetite offsetting strong wages growth. After rallying from intra-day lows, commodity currencies dipped again on Tuesday amid a slide in New Zealand dollar.

The Euro was held in tight ranges ahead of Monday’s New York open with a lack of trading volumes limiting market moves. The dollar held steady and EUR/USD was again unable to break above the 1.1800 level against the US currency amid expectations over an accommodative ECB monetary policy.

The New York Empire manufacturing index dipped to 18.3 for August from 43.0 the previous month and well below consensus forecasts of 29.0 for the month. There was a sharp slowdown in the new orders index and substantial dip in shipments, although unfilled orders increased at a slightly faster rate.

There was a reduction in the rate of employment growth, but cost pressures remained high and prices charged increased at a faster pace to a fresh record high. Companies were more optimistic over the outlook and expected price pressures to ease only slightly.

The dollar overall was able to post limited net gains after the Wall Street open equities dipped lower and risk appetite remained more fragile. Overall ranges were still narrow with EUR/USD around 1.1775 as trading volumes remained low.

The latest US retail sales data is due for release on Tuesday and a firm release would help offset the impact of the much weaker than expected consumer confidence data released on Monday while a weak report would tend to reinforce market concerns. The dollar edged higher on Tuesday amid an element of defensive demand amid reservations over coronavirus developments and EUR/USD retreated to around 1.1765 amid choppy trading conditions.

US Media reports on Monday indicated that the Japanese government was likely to extend the current coronavirus emergency measures until September 12th and could also extend the measures to additional prefectures which maintained unease over domestic economic trends.

US equities retreated sharply in early trading and Treasuries also posted net gains with the 10-year yield just below 1.25%. USD/JPY dipped to low at 109.10 before regaining some territory as Wall Street equities pared losses and Treasuries retreated from their best levels. Underlying confidence was still fragile with USD/JPY held around 109.25 at the European close with the yen resilient on the crosses.

Markets continued to debate potential Federal Reserve policy actions ahead of Chair Powell’s Jackson Hole speech next week. Boston head Rosengren stated that he would back a tapering announcement in September if there was another strong employment report early next month. He added that his preference would be to start reducing bond purchases in October or November.

Risk conditions were fragile in Asia on Tuesday with further concerns over regional coronavirus developments. USD/JPY was held around 109.30 with EUR/JPY around 128.60 as markets continued to monitor overall risk appetite.

Sterling struggled to secure independent direction on Monday, especially with a lack of domestic data and uncertainty ahead of this week’s releases. Risk appetite was more vulnerable during the day which hampered the UK currency to some extent, although overall selling pressure was light.

GBP/USD settled close to 1.3850 while GBP/EUR continued to test the 1.1750 support area.

Sterling edged lower in early Europe on Tuesday with sentiment eroded by more vulnerable global risk conditions amid low trading volumes.

The latest UK labour-market data recorded a decline in the unemployment rate to 4.7% in the three months to June from 4.8% previously, but there was a smaller than expected decline in the claimant count. Headline average earnings increased 8.8% in the year to June from 7.3% previously, reinforcing expectations of higher earnings trends.

Economic Calendar

07:00GBP Average Earning Including Bonus(JUN)7.40%6.60%
07:00GBP Claimant Count Change(M/M)(JUL)-114.8K
07:00GBP Unemployment Rate(JUN)4.80%4.80%
10:00Euro-Zone GDP (Q/Q)2.00%
10:00Euro-Zone GDP (Y/Y)13.70%
13:15CAD Housing Starts(JUL)282.1K
13:30USD Core Retail Sales (M/M)(JUL)1.30%
13:30USD Advance Retail Sales (M/M)(JUL)1.10%
14:15USD Industrial Production(JUL)0.40%
14:15USD Capacity Utilization(JUN)75.20%
15:00NAHB Housing Market Index(JUL)80
15:00USD Business Inventories(JUN)0.50%
18:30USD FOMC Member Powell Speech
23:45NZD PPI Input (Q/Q)2.1

*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.