Greenback hit on poor US data, GBP/USD bullish - Nomura

Analysts at Nomura explained that the dollar traded weakly this week on disappointing non-manufacturing ISM (51.4). Weak data in August (ISM’s, employment, regional surveys and vehicle sales) make a rate hike in September unlikely with the positive start to Q3 not be sustained in August.

Key Quotes:

"We continue to expect the Fed to hike in December, not September. Our rates strategists also wrote on whether the UK is bouncing out of Brexit? Not only the shortterm growth outlook is improving (with the UK services PMI surprising already upbeat expectations), but also the inflation trajectory between the UK and the rest of the developed world (particularly euro area) is improving.

Our rates strategists believe UK rates should be higher – pricing in BoE hikes will take time, but they argue there is room for rates further out the curve (favouring 10yr) to sell off. This is in line with our more constructive view of GBP amid the recent good data."