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Kantox currency update: US dollar advances on upbeat manufacturing data

U.S. Dollar note

The dollar appreciated against a basket of the most traded currencies on Tuesday, fuelled by better than expected US manufacturing PMI data and the investors’ concerns about the consequences of the trade crisis between the world’s two largest economies.

The US ISM Manufacturing index showed that the sector’s activity accelerated at its fastest pace in 14 years, which adds reasons for the Federal Reserve to hike rates at its next meeting, due on September the 26th.

EUR/USD: hits new lows at 1.1530: The euro depreciated on Tuesday and extended its reversal from last week highs at 1.1730, to intra-day lows at 1.1530 to pick up shortly afterwards, although it remains below 1.1600. As at London market opening times, the EUR/USD is trading at 1.1565.

GBP/USD: approaching 1.2800The pound remains weighed by market fears of an unfriendly Brexit and retreated for the fourth consecutive day, to reach lows at 1.2810, before picking up after BoE Governor, Mark Carney confirmed that he will remain in office beyond his planned exit. As at London market opening times, the GBP/USD is trading at 1.2835.

USD/JPY: approaches one-month highs at 111.80. The dollar appreciated against the yen on Tuesday, to reach session highs at 111.70 after the release of an upbeat US manufacturing activity data, which increases the odds of a rate hike in September. As at London market opening times, the USD/JPY is trading at 111.45.

In the Calendar Today

In Eurozone, today we will have the releases of the Markit Services PMI and the retail sales figures, although the impact on the euro will be minor.

In the UK the Markit Services PMI is expected to show a moderate rebound in August, which might offer a slight respite for the pound, although, in this case, the investors will remain focused on the progress of the Brexit negotiations.

In the US the focus will be on a string of conferences from Fed officials. The Bank is widely expected approve its third interest rate hike of the year at the end of the month and, in that sense, any signals confirming that would be supportive for the dollar.

08:00 GMT        EUR: Markit Services PMI (Aug)
Previous: 54.4             Expected: 54.4

08:30 GMT        GBP: Markit Services PMI (Aug)
Previous: 53.5             Expected: 53.9

19:00 GMT        Fed: Williams’ speech

20:00 GMT        Fed: Kashkari’s speech

22:30 GMT        Fed: Bostic’s speech