Overnight Headlines

*USD ended the day modestly lower, closing at 92.62

*US stocks retreated from record highs amid mixed data

*Oil prices backed off four-week highs, OPEC+ meeting today

*Australian GDP beat expectations to post a quarterly figure of 0.7%

USD closed the month marginally higher, but a little softer on the day. Dollar bulls are clinging to the trendline support from the June lows above 92.50. EUR/USD looked good for a break to the upside. But sellers prevented a rise above 1.1850. GBP similarly looked to be moving above 1.38 but a “death cross” (50-day SMA moves down through the 200-day SMA) is in play. USD/JPY ended higher as it battles with 110 and the 50-day SMA. AUD continues higher after better than forecast GDP overnight. NZD is now at the top of the recent summer range.

US equities came off their recent highs but posted solid returns for August. The S&P500 recorded its seventh straight month of gains. Very few areas and sectors stuck out yesterday. Asian markets are higher today with Japan upbeat. European bourses are expected to open firmly in the green. US futures are marginally higher.

Market Thoughts – Data in focus

We are having a slew of data this week with PMI day today across Europe. These are expected to stay unchanged or revised slightly lower but still above 50 (which denotes expansion in activity). Across the pond, we get ISM manufacturing for August. We also see an early glimpse of the US jobs picture with the ADP employment figures, ahead of Friday’s NFP.

More China data disappointed in the form of the Caixin PMI survey. This dropped into sub-50 territory for the first time since the start of last year. This points to a contraction in manufacturing and the theme that the peak is behind us. Of course, all eyes are on the NFP report as the dollar stabilises. The Fed is moving towards tapering, the start of which may appear closer with a strong payrolls number.

Chart of the Day – EUR hawks swoop

While headline eurozone CPI yesterday surged to the highest levels since November 2011, ECB hawks were out on the wires too. They are keen to discuss the slowing down (not cutting) of the emergency QE ECB programme (PEPP). But they caution against extending rates forward guidance to the standard bond buying plan (APP). This would imply an earlier end to net purchases.

The ECB meeting is next Thursday and this week has seen a determinedly more hawkish tone emerge. The euro has performed mid-pack over the last month or so. EUR/GBP has picked up off the recent lows with 0.8472 proving a strong level of support. Prices have now settled above the 50-day SMA and are looking towards initial resistance at 0.86.