US dollar strengthens in risk-averse trade

The US dollar trended higher through yesterday’s session as risk-off flows saw investors favour the safe-haven currency.

Meanwhile, the pound opens today’s session in a narrow range, with GBP/EUR muted at €1.1861, and GBP/USD flat at $1.3113. GBP/CAD is rangebound at CA$1.7751, while GBP/AUD and GBP/NZD hold steady at AU$1.9536 and NZ$2.1197 respectively.

Looking ahead, both the pound and euro could experience volatility this morning as the UK and the Eurozone release their respective service PMIs.

What’s been happening?

The US dollar firmed on Tuesday amid cautious trade sentiment, which saw the safe-haven ‘greenback’ continue to rise, despite another lacklustre ISM manufacturing PMI reading.

The index printed at 47.2 in August. Up from 46.8 in July but falling short of expectations it would rise to 47.5, while also reporting the US factory sector’s fifth consecutive contraction.

Turning to the pound, Tuesday saw the publication of the British Retail Consortium’s latest retail sales monitor rise from 0.3% to 0.8% which lent Sterling some modest support.

Also lifting GBP exchange rates was a cautious market mood, which saw the pound climb against its risker rivals.

Turning to the euro, a lack of economic data releases left the single currency largely directionless, only marginally lifted by Tuesday’s risk-off flows.

What’s coming up?

The pound could be buoyed today by the publication of the UK’s finalised services PMI for August.

The index is expected to rise from 52.5 to 53.3 and will likely underpin Sterling sentiment should the data confirm another robust reading in the UK’s vital services sector.

Turning to the Euro, the Eurozone’s own services index is also forecast to rise, from 51.9 to 53.3, and could also lift EUR exchange rates should the data match expectations.

Turning to the US dollar, the latest Job Openings and Labour Turnover survey (JOLTs) could act as a headwind for the currency this afternoon as an expected fall in new job openings in July is likely to raise fresh concern over the US labour market.