Daily Currency Update

USD - US Dollar

The USD is trading mixed against major currencies, yet the index gained traction due to weak European markets after lackluster PMI data. While stocks rose, weak European growth signals led to lower crude oil prices, further strengthening the USD rally, pushing the DXY near 104. However, limits might curb the dollar's rebound, especially with the upcoming Jackson Hole event. Some US economic data, including PMIs and New Home Sales, was released today. Recent DXY gains are mainly due to favorable spreads versus other currencies. The index, trading near its projected value based on 2-year spreads, could be fairly priced, and narrowing spreads might hinder USD advancement.

CAD - Canadian Dollar 

The CAD is currently experiencing a sense of decline, as several factors appear to be working against its favor. Despite a positive performance in global stocks for the day and a relatively stable short-term spread, the CAD's sentiment has been dampened by recent trends of decreasing crude oil prices over the past few sessions. This has contributed to the USD maintaining better support and the currency's actual value being separated from estimated fair values (1.3274 as of this morning). This morning, Canadian Retail Sales data will be released, and it is anticipated to show no significant change for the month. Should the data turn out weak, it could further contribute to the prevailing negative sentiment surrounding the CAD. Observe the USD/CAD trends.

EUR - Euro 

Initial PMI data from the Eurozone indicated subdued, although slightly improved, manufacturing trends in Germany and France compared to forecasts. However, both nations experienced significantly weaker-than-anticipated services activity this month, resulting in a decline of the Eurozone services index to 48.3. This stands in contrast to the expected 50.5 and the 50.9 recorded in July. The composite index, which takes both sectors into account, decreased from 48.6 to 47. This underwhelming data suggests that sluggish growth patterns continue. As a response to this data, September ECB swaps eased by approximately 5 basis points, signifying that less than 10 basis points of tightening are now factored in. The data has led to increased uncertainty about the possibility of further tightening measures.

GBP - British Pound

The GBP has experienced a decline of over one cent from its levels prior to the PMI data release. Disappointing UK data also showcased a significant decrease in services, dropping to 48.7 in August compared to July's 51.5. The initial composite index for this month fell to 47.9, down from the previous 50.8. Although expectations for Bank of England (BoE) policy have weakened, markets are still anticipating a 50 basis-point tightening in the upcoming months, peaking at 5.75%. There is currently more than 25 basis points priced in for September's decision. Sterling might discover support in the low 1.26 range.