Sterling continued to benefit from short covering.
The US ADP jobs data and ISM services-sector report were stronger than expected and lessened immediate fears over the overall US and global outlook.
Overall risk appetite was also supported by the data and hopes for US-China trade progress with US equity markets at 1-month highs and bond yields moved higher.
The dollar regained some support as markets pried out the possibility of a 0.50% September rate cut, but EUR/USD traded above 1.1000.
Defensive currencies lost ground as risk appetite remained firm and commodity currencies made tentative net gains. Sterling continued to benefit from short covering amid expectations that a hard Brexit would be blocked by parliament.
Oil prices failed to hold gains triggered by an inventory draw. Precious metals declined sharply as global risk appetite strengthened.
During Thursday, the Euro gained an element of support from reduced fears surrounding the European political climate with a dip in perceived risk of a ‘no-deal’ Brexit. German bond yields moved higher which also supported the single currency amid expectations that the ECB would take a more measured stance in the September stimulus package.
Sterling gained an element of support from a significant improvement in global risk appetite, especially given the UK dependence on international trade. Domestic political tensions remained extremely high with the government under intense pressure after a series of parliamentary defeats.
Legislation to prevent the UK leaving the EU on October 31st should be completed by Friday and immediate fears over a ‘no-deal’ outcome faded while the government will again call for an Election in Monday’s House of Commons session with opposition parties still opposed to an election before a ‘no-deal’ Brexit is ruled out.
From the market’s perspective, the chances of a ‘no-deal’ Brexit were seen to have diminished and Bank of England Governor Carney’s comments the previous day that the downside risks of a ‘no-deal’ outcome had diminished slightly also offered some reassurance. GBP/USD pushed to 5-week highs just above 1.2350 before correcting while GBP/EUR dipped to the 1.1140 area. Position adjustment will remain important on Friday with further choppy trading inevitable.
|07:00||German Industrial Production (M/M)(JUL)||0.40%||-1.10%|
|08:30||GBP Halifax HPI (M/M)(AUG)||0.20%||0.40%|
|09:30||GBP Consumer Inflation Expectations (Q/Q)||-||3.10%|
|10:00||Euro-Zone GDP (Q/Q)||0.40%||0.20%|
|10:00||Euro-Zone GDP (Y/Y)||1.20%||1.10%|
|13:30||USD Average Hourly Earnings (M/M)(AUG)||0.30%||0.30%|
|13:30||USD Private Nonfarm Payrolls (AUG)||144K||148K|
|13:30||USD Non-farm Payrolls(M/M)(AUG)||159K||164K|
|13:30||United States Unemployment Rate(M/M)(AUG)||3.70%||3.70%|
|13:30||CAD Employment Change (M/M)(AUG)||12.5K||-24.2K|
|13:30||CAD Full Employment Change(AUG)||-||-11.6K|
|13:30||CAD Unemployment Rate (M/M)(AUG)||-||5.70%|
|13:30||USD Average Hourly Earnings (Y/Y)(AUG)||3.10%||3.20%|
|15:00||CAD Ivey PMI(M/M)(AUG)||-||54.2|