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European Session – Euro supported by positive Eurozone PMIs, dollar remains broadly weaker

The euro approached the key 1.13 level against the US dollar to hit a two-month high at 1.1306. Eurozone PMIs released today were mostly positive. The flash PMI for August suggests that the Euro area is still experiencing one of its best periods of economic growth and job creation during the past four years. The Markit flash composite PMI for the Eurozone rose to 54.1 in August from 53.9 in July. Estimates were for a reading of 53.7. The manufacturing and services PMIs both beat estimates.

Greece will hold snap elections after Prime Minister Alexis Tsipras announced his resignation on Thursday, hours after sealing an 86 billion euro deal. The elections are anticipated to take place on September 20th. The impact on the euro was limited in reaction to the news, with risk likely later in the autumn.

Sterling broke to fresh highs against the dollar to reach its highest level since early July. The response to UK public finance figures was limited. Cable peaked at 1.5722 in early European session trading before easing down to 1.5656.

The US dollar was broadly weaker, with the Dollar index falling to an eight-week low at 95.4.

The dollar was pressured to fresh a one-month low against the yen to touch 122.34. More bad news from China in the form of soft manufacturing PMIs and a global equities rout contributed to falling US Treasury yields and a drop in the greenback. US flash manufacturing PMI data today were disappointing. The August index printed a reading of 52.9, missing expectations of 54.0 and lower than the previous 53.8.

Gold is regaining its role as a haven investment amid a global equities rout, more bad China news fuels risk aversion with the precious metal set for its biggest weekly gain since January. Jittery markets led to an increase in safe haven demand and flows into gold. The precious metal rose to its highest level since July 7 to reach $1,168.16 in Asian session before steadying around $1,155.

Gold’s rebound has been helped by the weaker dollar, since the two assets tend to have an inverse price relationship. The falling odds that the Fed will raise interest rates at its September meeting have contributed to the dollar’s weakness.

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