Today should be a quiet session for EUR/USD. We doubt such a move would help the euro much. And there is some focus too that the ECB might just lift the main refinancing rate (now 4.25%) while keeping the deposit rate unchanged at 3.75%. Higher natural gas prices will not be welcome news for Europe.Īs for next week's European Central Bank meeting, the market now prices just 8p of rate hikes. We mentioned higher oil prices potentially weighing on the euro earlier this week and the focus today switches to natural gas, where it looks like LNG workers in Australia will go on strike after all. This suggests DXY stays bid near 105.00.ĮUR/USD remains fragile as US data stays strong and the news out of the eurozone and China remains bleak. We cannot see investors wanting to offload dollar balances anytime soon. The weekend sees a G20 meeting in New Delhi, with much focus on how new alliances develop following the recently announced expansion plans of the BRICS. There is very little in the way of US speakers or US data today. The weaker CNY/CNH will continue to keep EM FX broadly offered and the dollar bid. Low Chinese CPI next week and a PBoC rate decision with the one-year lending rate will keep expectations alive of further rate cuts too. USD/CNH is currently trading above that level. They have maintained the spread of the fixings to the model-implied fixings of around 1100 CNY pips, but the higher fixing has put paid to ideas that Chinese officials have some kind of line in the sand for USD/CNY at 7.35. The highlight of the overnight session, however, has been the People's Bank of China (PBoC) allowing a higher fixing in the onshore USD/CNY. Japanese officials are sounding like we could well see intervention shortly - e.g. Here, both Japanese and Chinese officials are fighting against dollar strength - with limited degrees of success. Clearly, this pushes the idea of a Fed easing cycle later and keeps the dollar stronger for longer.Īs has been the case so often, the dollar is the United States currency and everyone else's problem. the Fed not hiking in September but hiking again later in the year. With activity data staying strong, it seems the market may be more minded to buy into the idea of another 'skip' - i.e. Following the above-expected ISM Services index on Wednesday, yesterday it was the turn of the weekly initial jobless claims to drop back to the lowest levels since February and question the narrative that tightness in the US labour market is easing. The dollar is consolidating near the highest levels since March as US data continues to surprise on the upside.
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