We are entering the final two days of the month, one which has been positive for the dollar, but some of those gains are being given up into month-end, a trend which could continue over the coming two days. The dollar has given up some ground vs. the Aussie, less so vs. the euro and sterling. Month end historically has more volatility variation vs. other trading days and this remains the risk for Friday. Looking ahead into September, this has historically been a negative month for the dollar, the dollar index falling by 1% on average over the past 10 years, having fallen in four of the past 6 Septembers. This is not to say we are going to see the dollar fall next month, because the underlying trends to greater strength remain intact, but the path towards further gains may not be that steady.
Today’s price action will initially be focused on Germany CPI data, with state data coming out from 08:00 GMT. We also see labour market data for Germany, where the rate is seen steady at 6.7%. The euro will be sensitive to any fresh signs of weakness in the German labour market. We also see money supply and lending data from the ECB, which will be of peripheral interest. For the single currency, the main theme is whether we see further policy action from the ECB next week, which is looking increasingly likely. Note that inflation data is seen in Japan overnight, with the headline rate still being boosted by the sales tax increase seen earlier in the year. Finally, as we mentioned yesterday, the CHF remains in focus as EURCHF gets ever closer to the SNB’s 1.20 floor.