Currency markets remained range-bound for the early session, yet the fear of interest rates staying higher for longer dominated the theme, meaning risk pointed towards the safe-haven dollar.
Stock markets took an early lead, making up some of last week’s losses, however we saw a quick turnaround once the US opened, helping fuel the dollar’s strength. Fed member Barkin believes that if the US were to see a recession it would likely be less severe, meaning companies may have to contend with high interest rates for a longer period of time, stubborn inflation, and supply chain issues - eventually damaging stocks.
* Daily move - against G10 rates at 7:30am, 23.08.23
** Indicative rates - interbank rates at 7:30am, 23.08.23
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Flash PMIs are the focus for today starting with the euro area, the UK print at 09:30, and the US later at 14:45.
If PMI data from the eurozone continues to show a decline, then we may see GBPEUR attempt to break the stubborn highs of Aug 2022. The dollar remains resilient with no weakness showing through the Asian trading session, and I believe the markets will be range-bound with investors eagerly awaiting the return of the Jackson Hole Symposium. The dollar will likely continue its strength, especially while stocks struggle to make up any of the lost ground from last week, and if risk remains the driver, the dollar will be the destination for most.
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