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Dollar weakness boosts GBP, EUR

USD - United States Dollar

The US dollar lost some ground to other major currencies after the release of mixed economic data. The US Dollar Index was down 0.19%, trading around 92.44.

Economic activity in the manufacturing sector grew in August at 59.9%, according to the ISM Manufacturing PMI which is based on a survey of purchasing managers in the manufacturing industry and a leading indicator of economic health. This number beat expectations but the employment component dropped. Private payrolls also missed expectations, according to ADP’s jobs report. Private payrolls grew by 374,000, but economists had estimated an increase of 600,000.

US non-farm payrolls are due on Friday, which investors hope could offer clues on the timing of the Federal Reserve’s asset purchase tapering.

Key Movers

The euro strengthened against the US dollar, trading near one-month highs, after data showed Eurozone inflation increased to 3% year-on-year in August, above the European Central Bank’s 2% target and a 2.7% forecast. It's been a long time since European inflation hit the heights of 3%. Ten years in fact. Ultra-low inflation was a perennial issue for the former ECB President (and incumbent Italian PM) Mario Draghi but change is afoot in the Eurozone. The question is whether this jump in inflation numbers will sway the current crop at the ECB to move away from their very accommodative monetary policy, a move that could see the euro strengthen, or whether they will keep on dismissing it as simply 'transitory'. EURUSD was up 0.38%, trading around 1.8525 at the time of writing.

Data-driven dollar weakness also boosted the pound this morning. GBPUSD was up 0.27%, trading around 1.3792, closing in on the 1.38 mark.

Another winner in Tuesday morning’s session was the Australian dollar. AUDUSD climbed 0.75%, trading around 0.7368.

Expected Ranges

EUR/USD: 1.1796 - 1.1853 ▲

GBP/USD: 1.3733 - 1.3795 ▲

AUD/USD: 0.7305 - 0.7371 ▲

USD/CAD: 1.2583 - 1.2635 ▲