The near term recovery on the dollar continues for a third session, in a move which is impacting across major forex and precious metals. Dovish steers from FOMC members in recent days have played into this, as has a rather downbeat assessment of the US economic recovery from the Fed’s Beige Book last night. However, the strengthening also has origins from the corridors of the European Central Bank. With the euro hitting $1.20 this week, there has been a range of briefings to relay the concerns that the Governing Council has around these levels. ECB chief economist Philip Lane noted that the exchange rate “does matter” and there have been other briefings to suggest that a strong euro could hurt export growth and dampen inflation further. The near term impact is hitting euro and by association strengthening the dollar, which is knocking through major forex. For now, these moves are simply near term and counter to a bigger dollar downtrend, however there are some key levels approaching on major markets. How the dollar reacts in the coming days to these level could be key to the medium term outlook. Focus today will be on any further ECB board member comments, whilst services PMIs and the ISM Non-Manufacturing will also be eyed.
Wall Street closed another big session higher, with the S&P 500 +1.5% at 3580. US futures are a shade lower today though, with E-mini S&Ps -0.2%. Asian markets were generally positive overnight, with Nikkei +0.9% but Shanghai Composite -0.7%. In Europe, futures suggest a marginally positive start, with FTSE futures +0.2% and DAX futures +0.7%. In forex, the USD rebound continues to run, with GBP and EUR both around half a percent lower, whilst similar slips on AUD and NZD, whilst JPY holds up relatively well. In commodities, the USD rebound is weighing again on gold (just over half a percent lower) and silver (-2.5%). Oil fell sharply yesterday and is down another -0.3% today as demand concerns weigh.
Today is a day of services PMIs on the economic calendar. Eurozone data is first up at 0900BST, where the final Eurozone Services PMI for August is expected to be unrevised at 50.1 from the flash (flash August 50.1, final July 54.7). This would leave the final Eurozone Composite PMI at 51.6 (51.6 flash August, 54.9 final July). The UK data is at 0930BST and is expected to show final UK Services PMI confirmed at 60.1 (60.1 flash August, whilst the final July reading was 56.5). This would leave the final UK Composite PMI at 60.3 (60.3 flash August, up from 57.0 final July). Eurozone Retail