North American FX Open - Cable eyes 2023 highs after upbeat flash UK PMIs

The DOLLAR index remains under pressure after dipping to a new 2024 low yesterday, but trade overnight has seen the US unit steady itself after another miserable week. Since the NFPs, the Dollar has now lost 3.3% vs the Euro, 3% vs the Pound and 2.4% against the Yen.

The FOMC minutes from the July meeting were instructive, as they revealed that the "vast majority" of the board expect a rate cut in September, while some also acknowledged there was a plausible case for cutting interest rates in July. Remember the decision came two days before the weak NFP report.

It has been an overnight session full of flash PMIs.

Japanese flash PMIs for August indicated modest improvements across all headline gauges, while Australian manufacturing, services, and composite PMIs all reached their respective three-month highs.

The French PMIs, especially the services reading benefitted enormously from the Paris Olympics, but the German reading was another disappointment, with manufacturing falling back to 42.1 in August from 43.2 in July. The data increases the likelihood of a second straight quarter of negative German growth, which would obviously lead to recession talk.

The Eurozone flash PMIs did show an improvement, but that was mostly down to the outlying French figures.

The UK flash PMIs for August are another encouraging piece of economic news, with all three readings beating the consensus forecast. Manufacturing improved to 52.5 from 52.1, the all important services sector rose to 53.3 from 52.5 and the composite increased to 53.4 from 52.8.

The survey's compilers state that the report is consistent with the economy expanding at a quarterly rate of 0.3% and add that "August is witnessing a welcome combination of stronger economic growth, improved job creation and lower inflation. On the prices front, cost pressures faced by businesses increased at their lowest rate since January 2021.

The data shows that the Bank of England are likely to remain cautious in their easing cycle, with the OIS curve implying a 50-50 chance of another rate cut in September.

In response Cable rose to 1.3129 and now has the 2023 high up at 1.3141 within touching distance.

EZ Q2 negotiated pay rose 3.6% from a year ago, down from 4.7% in the previous three months and broadly in line with market estimates.

Coupled with the fact that the growth outlook for the EZ has deteriorated, confidence is down, and that Germany saw output unexpectedly contract in the second quarter, today's outcome helps reinforce the case for the ECB to continue lowering interest rates next month.

For today, the early focus will be on the latest set of ECB minutes, but then the attention will quickly turn to the US with claims, the flash PMI and existing home sales all due. We also receive the latest update on EZ Consumer Confidence.

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