GBP – Sterling rebounded sharply, both against the dollar (high of GBP/USD 1.3257) and against the euro (EUR/GBP 0.8403), supported by an excellent manufacturing PMI, on the rebound in August beyond the rosiest expectations, from 48.3 to 53.3. The index had plummeted by almost the same amount in July, dropping below the 50 mark, affected by the outcome of the referendum. The August rebound is explained by the clear improvement of the outlook for exports, on the back of the depreciation of the pound, therefore the sector’s performance is likely to improve in the coming months, albeit modestly. While downside risks to sterling are still in place, actual downside should remain modest if the impact of Brexit on the domestic economy proves to be contained.

JPY – The yen deepened its decline, reaching USD/JPY 103.53. A Fed hike in September should weaken the Japanese currency further, pushing it back above the USD/JPY 105 mark (albeit not by much). On this front, Friday’s US Employment Report will be crucial.

Majors Analysis, Comments,  Indications, fx trader, forex chart 1

Majors Analysis, Comments,  Indications, fx trader, forex chart 2Source: Thomson Reuters and Intesa Sanpaolo elaborations

Asmara Jamaleh
Economist – Forex Markets
Intesa Sanpaolo Research Department