Euro: Trading near 1.16 against US Dollar as yields rise – Danske Bank

Danske Research Team reports that EUR/USD is around the 1.16 level while European government bond yields continue to climb and US yields show a mixed pattern. Ten-year German yields are up about 50 basis points since early July, with the curve steepening, and US Treasuries have risen nearly 40 basis points, shaping the backdrop for the currency pair.

Pair holds around 1.16 level

"European government bond yields continued to rise yesterday, while it was a more mixed picture in the US. 10Y German government bond yields have now risen 50bp since early July, while 10Y Treasuries have risen almost 40bp. The German curve has steepened between 2-10Y as the 2Y German bond has risen 40bp. The US curve has also steepened some 10bp. "

"The final euro area service and composite PMIs for August are released today, which we expect to confirm the flash release. The flash services PMI was unchanged at 51.7 but still came in above expectations. Tuesday's final manufacturing PMI, which makes up 35% of the final composite PMI, showed a solid rebound, with Germany in the driver's seat."

"US final services PMIs for August are due. The August flash release increased markedly for the second month in a row to the highest level since December 2024. The details pointed to solid demand, rising backlogs and firmer hiring, while output charge inflation eased to a six-month low despite still-elevated input cost pressures."

"Also in the US, the Challenger layoff report for August is released. In July, layoff announcements were at their lowest level in two years, while levels are already low from a historical perspective. AI has accounted for around one third of layoffs in recent months."

"In the US, ADP private payrolls increased by 38k in August (cons.: 48k), while the July print was revised slightly higher to 46k from 44k. Sector details were mixed: Education & Health Services, Leisure & Hospitality and Construction had higher payrolls growth than in July, while Manufacturing and Professional & Business services declined by 17k and 16k, respectively."

"The release points to softer hiring momentum ahead of Friday's official jobs report, although ADP has been a poor guide historically to the BLS private payrolls estimate."

"On the wires, Fed's Waller (voter) is expected to speak. In July, Waller mentioned that if core inflation was "hot", FOMC would need to consider tightening policy in the near-term."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)