FX | EU Currency: Dollar rises on bullish data, euro's fall

3 minutes - Source: CNBC

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The U.S. dollar has regained some strength in recent weeks.
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The dollar rallied on Friday on bullish economic data and hit a two-week high against the euro as expectations of central bank stimulus weighed on the single currency.
U.S. homebuilding fell for a third straight month in July amid a steep decline in the construction of multi-family housing units, but a jump in permits to a seven-month high offered hope for the struggling housing market. Better-than-expected retail sales data in the United States on Thursday also encouraged buying of the dollar.
“Any downturn in the U.S. economy appeared on a further rather than closer horizon after bullish retail spending data this week suggested America’s main growth engine had ample horsepower to extend the record-long expansion,” said Joe Manimbo, senior market analyst at Western Union Business Solutions.
The euro fell 0.14% to $1.109, shy of the two-year low of $1.1025 it reached on Aug. 1. Friday’s fall was caused by growing expectations of an interest rate cut by the European Central Bank after Governing Council member Olli Rehn suggested on Thursday that the central bank could restart its quantitative easing program and was open to extending it into equity purchases.
“Global markets started Friday in a better mood with sentiment boosted by expectations for the European Central Bank to err on the side of bold stimulus as soon as central bankers’ coming meeting on Sept. 12,” said Manimbo.
The biggest move against the dollar was in Norway’s crown, which dropped to more than a 17-year low of 9.0375 against the greenback in early Friday trading.
The crown extended its selloff after the Norges Bank said on Thursday its plan for an interest rate rise this year was now more uncertain.
Norway’s currency has been falling fast since June as the price of oil - its principal export - has tumbled and as fears of weaker global growth and tougher trade relations have weighed on the Norwegian economy.
Measured against a basket of six other major currencies, the dollar was higher by 0.05% at 98.19. It has recovered by 1.25% from its three-week low on Aug. 9.
Data showing U.S. consumers kept spending in July came as a relief after the Treasury yield curve inverted this week, which historically has preceded U.S. recessions.
The inversion stoked worries about the impact of the Sino-U.S. trade war. The curve was slightly steeper on Friday at 4.7 basis points. 

FX I Currency Report: Dollar recovers as strong US data soothes market nerves

3 minutes - Source: CNBC

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The dollar recovered from early weakness against the safe-haven yen as better-than-expected U.S. retail sales data on Thursday eased fears that the U.S. economy could be headed for a recession.
The Japanese yen, which tends to benefit during geopolitical or financial stress as Japan is the world’s biggest creditor nation, has strengthened about 0.3% against the dollar this week as investors reached for safety.
The yen started the day strong against the dollar as investors fretted over this week’s economic data from China and Germany that revealed the extent of the damage the China-U.S. trade dispute is causing to the world economy.
The Japanese currency advanced sharply against the greenback on Wednesday after the first inversion in the U.S. Treasury yield curve in 12 years sparked heightened fears of an imminent end to the longest economic expansion in U.S. history.
However, the yen retreated against the greenback on Thursday after data showed U.S. retail sales surged in July, helping assuage financial markets’ fears that the U.S. economy was heading into recession.
“With the rest of the world sliding into the abyss, the July retail sales figures show a resurgent U.S. consumer riding to the rescue once again,” Michael Pearce, Senior U.S. Economist at Capital Economics said in a note.
U.S. retail sales rose in July as consumers bought a range of goods even as they cut back on motor vehicle purchases, which could help ease financial markets’ fears that the economy was heading into recession.
The dollar was up 0.27% against the yen.
The dollar index, which tracks the greenback versus the euro, yen, sterling and three other currencies, was up 0.18% at 98.166, close to a two-week high.
Elsewhere, Norway’s crown weakened after its central bank, the Norges Bank, said its policy outlook was now more uncertain, raising doubts about whether it would raise rates later in 2019.
The crown slipped to a near 18-year low against the U.S. dollar.
The Australian dollar was up 0.44% to $0.6777 after data showed the Australian economy had added a forecast-busting 41,100 new jobs in July.
However, as the Sino-U.S. trade war raises fears of a global recession, businesses run the risk of being caught in a self-fulfilling vicious cycle, a top Australian central banker warned on Thursday.
Meanwhile, sterling rose 0.46% against the dollar, helped by better-than-expected retail sales and news that Britain’s opposition Labour Party has begun its bid to bring down Prime Minister Boris Johnson and stop him from taking Britain out of the European Union without a deal.

FX: Recession indicator, trade pessimism sink dollar versus yen

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The Japanese yen jumped to a session high against the dollar on Wednesday after the U.S. Treasury bond yield curve inverted for the first time since 2007 and investors, gripped by fear of a looming global recession, fled to the safety of perceived safe-haven assets.
An inversion of the yield curve - when the spread between 2- and 10-year Treasury yields falls below zero - is an indicator of coming recession. The chill the inverted curve sent through global markets was compounded by weak data from China and Germany and waning optimism about progress reported in U.S.-China trade talks on Tuesday.
The yen, already stronger on the day, was boosted by the inversion and was trading up 0.73% at 105.94, though still off a 1-1/2-year high -excepting a flash crash in January - hit Monday.
“There is plenty of doom and gloom to spread across the globe,” said John Doyle, vice president for dealing and trading at Tempus Inc in Washington. The U.S. yield curve “is a major recession indicator. Germany, Italy and the UK are likely headed for a recession. Today’s Chinese data was shockingly bad.”
Data on Wednesday showed the Chinese economy has continued to weaken. Industrial output rose in July at the slowest pace in more than 17 years. Elsewhere, slumping exports sent Germany’s economy into reverse in the second quarter.
On Tuesday, the dollar gained dramatically against the yen after U.S. President Donald Trump backed off his Sept. 1 deadline for imposing 10% tariffs on remaining Chinese imports, delaying duties on cellphones, laptops and other consumer goods. The announcement came after renewed trade discussions between U.S. and Chinese officials.
Those gains were reversed overnight, however, as skepticism about the progress began to weigh.
“I thought yesterday’s risk-on move was going to be short-lived, which looks to be right,” said Doyle. “Reopening talks with China is a good step, but there has not been any real progress in months, so I think markets are starting to discount efforts by the U.S. or China to de-escalate because recent history has shown that little comes from it.”
The dollar index, a measure of the dollar against a basket of currencies, was 0.15% higher in midmorning trade at 97.959. While an inverted yield curve may have raised fears about the U.S. economy, fundamentals in other G10 countries look worse, boosting the dollar’s appeal.
China’s offshore yuan gave up some of its earlier gains on Wednesday as the weaker-than-expected economic data tempered optimism generated by the U.S. decision to delay tariffs.

FX : Dollar soars versus yen after US makes trade concessions

3 minutes - Source: CNBC

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Torsakarin | iStock / 360 | Getty Images

The U.S. dollar took off on Tuesday morning, clobbering the Japanese yen, after the Trump administration said it would delay 10% tariffs on some Chinese products scheduled to begin next month, a significant concession in the trade conflict between Washington and Beijing.
The U.S. Trade Representative said it would delay tariffs on laptops and cellphones, among other products, set to be imposed in September.
The U.S. dollar rose 1.49% to 106.85 Japanese yen per dollar. The yen is a safe-haven asset which benefits in moments of geopolitical uncertainty and during economic downturns. The U.S.-China trade war had begun to affect economic growth in the United States and raise fears that the conflict could lead to a recession.
Other safe havens like Treasury bonds also saw prices fall as investors moved money into riskier assets. The dollar index was 0.38% higher at 97.749, and the offshore Chinese yuan was 1.38% stronger at 7.0050.
The news had a modest effect on interest rate forecasts for 2019. Two to three cuts have been priced in by the end of the year, though on Tuesday morning expectations of two rate cuts increased to 47.9% from 45.7% a day prior, according to CME Group’s FedWatch tool.
Still, some analysts cautioned a moderate response. “The fact is that we have seen this film before, and it could be naive to think so much on the back of this headline,” said Naeem Aslam, chief market analyst at ThinkMarkets in London.
The U.S. dollar was also buoyed on Tuesday after the United States reported that consumer prices in July increased, though the easing of trade tensions could tamp down further inflationary pressures.
The Labor Department on Tuesday reported that the consumer price index increased 0.3% last month, lifted by gains in the cost of energy products and a range of other goods. The CPI had edged up 0.1% for two straight months. In the 12 months through July, the CPI increased 1.8% after advancing 1.6% in June. Economists polled by Reuters had forecast the CPI would accelerate 0.3% in July and rise 1.7% on a year-on-year basis.
Financial markets have fully priced in an interest rate cut in September. Expectations that rates will be cut by 25 basis points rose to 92.7% from 84.6% a day prior as fewer traders bet on a more dramatic 50-basis-point cut next month.

FX: Dollar flat, sterling, euro tick up with market in August lull

3 minutes - Source: CNBC

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Tomohiro Ohsumi | Bloomberg | Getty Images

The U.S. dollar index was roughly flat on Monday and sterling and the euro saw a modest rise as the foreign exchange market fell into an August lull, a traditionally quiet trading period with many investors and traders on vacation.
The British pound was 0.37% higher to trade at $1.208, with the euro up 0.17% against the dollar at $1.1219.
“It has been a pretty quiet day overall. We have had sterling and euro bubbling up. I don’t think there’s any particular super-positive news behind that. But, markets held substantial shorts in both currencies,” said Gregory Anderson, global head of foreign exchange strategy at BMO Capital Markets in New York.
The currency market is “heading into the deepest part of the holiday period. People are taking the shorts off and it puts upward pressure on both currencies. It’s probably the biggest story in FX for today.”
The dollar index was 0.1% lower at 97.390, having fallen earlier on expectations that a prolonged U.S.-China trade war would have a negative impact on American economic growth.
The Japanese yen rose to its highest against the dollar since March 2018 - barring a flash crash in January this year - as investors ramped up bets that the safe-haven currency could gain more if the trade conflict is prolonged. It was last 0.38% stronger against the dollar at 105.26.
“The stronger yen was at or near 2019 highs against its U.S. counterpart on prospects of a long drawn-out U.S.-China trade war. The longer the trade war drags on, the more likely it would weigh (on) the global outlook and crimp the world economy, a negative for market morale,” said Joe Manimbo, senior market analyst at Western Union Business Solutions.
Goldman Sachs analysts on Sunday said they no longer expected Washington and Beijing to come to a trade agreement before the 2020 presidential election. They lowered their forecast for fourth-quarter U.S. growth and said the chances a protracted trade war would lead to recession were rising.
This week, market attention will be on Chinese retail sales and industrial output for July, due out on Wednesday, to gauge the trade war’s impact on domestic activity.
Investors will also be focused on the U.S. Federal Reserve’s annual symposium at Jackson Hole, Wyoming, later this month, seeking greater clarity on the future path of interest rates. Markets are expecting two to three additional rate cuts from the Fed by the end of the year.

FX: Yuan gains as China appears to curb currency weakness

3 minutes - Source: CNBC

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Chinese yuan and dollar
China Photos | Getty Images

The Chinese yuan strengthened and demand for safe haven currencies like the Japanese yen and Swiss franc fell on Tuesday as China appeared to take steps to stabilize its currency, after the yuan on Monday breached a key level and sparked broad risk aversion.
Stocks and emerging market currencies plunged on Monday and safe havens jumped after Chinese authorities allowed the yuan to break through the psychologically important level of 7 per dollar, its lowest level since the 2008 financial crisis.
Risk appetite improved on Tuesday after the People’s Bank of China fixed the daily reference rate for the onshore Chinese yuan at 6.9683, firmer than the expected 6.9871, and below the key 7 rate. The central bank also said it was selling yuan-denominated bills in Hong Kong, a move seen as curtailing short selling of the currency.
The signs that China’s not willing to let the CNY continue drifting above 7 is somewhat constructive from a cross asset perspective, said Bipan Rai, North American head of FX strategy at CIBC Capital Markets in Toronto.
Onshore yuan stayed above 7 but gained 0.32% percent to 7.0235 per dollar, after weakening as far as 7.0575 overnight. The offshore yuan also gained 0.70% to 7.0482, down from a high of 7.1397.
Escalating tensions between the United States and China are likely to keep investors cautious with no end in sight to the Sino-U.S. trade war. The U.S. Treasury Department announced late on Monday that it had determined for the first time since 1994 that China was manipulating its currency and said that Washington would engage the International Monetary Fund to clamp down on Beijing.
China’s central bank responded on Tuesday that China “has not used and will not use the exchange rate as a tool to deal with trade disputes. It added that Washington’s decision to label Beijing as a currency manipulator would “severely damage international financial order and cause chaos in financial markets.
“The fact that the Treasury has labeled China as a currency manipulator, especially since this is an out of cycle move by the U.S. Treasury, suggests that things are pretty antagonistic between the U.S. and China and volatility should continue to remain elevated into the near term,” Rai said.
Chinese monetary authorities let the yuan slide past the 7 level so that markets could finally factor in concerns around the Sino-U.S. trade war and weakening economic growth, three people with knowledge of the discussions said on Monday.

FX: China's yuan drops below 7 per dollar as trade war escalates

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Foreign exchange currencies.
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China let its yuan weaken below 7 to the dollar on Monday, an 11-year low, adding to broad risk aversion on concerns about the escalation of the U.S.-China trade war.

Investors dumped export-oriented Asian currencies and rushed into safe havens, with the Japanese yen surging to a seven-month high.
Chinese authorities, who had been expected to defend the psychologically important level , allowed the currency to drop to its lowest in the onshore market since the 2008 global financial crisis.
“We’ve had a pretty meaningful reaction, where 7 in particular was a level that the market was very sensitive to in dollar/CNY. Now that weve broken that, risk appetite has taken a hit,” said Brian Daingerfield, head of G10 FX strategy for the Americas at NatWest Markets in Connecticut. “I think there’s a sense that President Trump might try and escalate in terms of a reaction if he thinks that this was a deliberate move by the Chinese to try and weaken their currency artificially,” Daingerfield said.
Beijing on Friday vowed to fight back against U.S. President Donald Trump’s decision to impose 10% tariffs on $300 billion of Chinese imports, ending a month-long trade truce.
Trump on Monday called the Chinese currency move a major violation and currency manipulation.
The escalation of the trade dispute has increased speculation that the United States may act to weaken the greenback, though direct intervention is still viewed as unlikely.
Trump has aimed to weaken the dollar through comments on Twitter that include pressuring the Federal Reserve to cut rates. The greenback dropped 0.86% against the euro as Treasury yields fell and traders priced in more rate cuts this year.
“The whole trade war I think upset the apple cart. It does raise the recession risk,” said Win Thin, global head of currency strategy at Brown Brothers Harriman in New York.
Interest rate futures traders are pricing in a 100% chance of a rate cut at the Fed’s September meeting, with the odds of a 50 basis point rate cut jumping to 30% on Monday, from only 1.5% on Friday, according to the CME Group’s FedWatch tool.
Japan’s yen, which investors buy in times of risk aversion, rose to its highest since a January flash crash. The yen was last up 0.59% at 105.95. Japan’s top currency diplomat, Yoshiki Takeuchi, warned that Tokyo was ready to intervene if yen gains threatened its export-reliant economy.

Source: CNBC

FX | The Dollar | Dollar weakens as September rate cut bets mount

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The dollar fell broadly on Friday as news of slower U.S. employment growth in July and heightened U.S.-China trade tensions fueled expectations that the Federal Reserve would cut interest rates again in September.
Nonfarm payrolls increased by 164,000 jobs in July, fewer than the month prior, and wages increased modestly, the Labor Department said. The report came a day after U.S. President Donald Trump announced an additional 10% tariff on $300 billion worth of Chinese imports starting Sept. 1, leading financial markets to almost fully price in a September rate cut.
The dollar fell 0.76% against the Japanese yen to its lowest since Jan. 3, last at 106.50. Versus the euro it was 0.22% weaker at $1.1109. The Swiss franc, which like the yen serves as a safe-haven investment in times of market volatility, was 0.83% stronger to 0.9818 franc per dollar.
“On balance it is probably a slightly dollar-negative number because I do think that the totality of the report increases the case for a Fed rate cut in September. We’re already at the point where we’re trading that,” said Greg Anderson, global head of foreign exchange strategy at BMO Capital Markets in New York.
The U.S. central bank on Wednesday cut its short-term interest rate for the first time since 2008. Fed Chair Jerome Powell described the widely anticipated 25-basis-point monetary policy easing as a mid-cycle policy adjustment to protect U.S. expansion from the global economic slowdown happening outside its borders.
Following the cut, the dollar rose in sympathy with U.S. Treasury note prices, but that move had largely been retraced on Friday.
The chance of a September rate cut was 98.1% on Friday afternoon, according to CME Group’s FedWatch tool, a large jump from 56.2% a week prior. Not all market participants were persuaded.
“We think that’s way too high. Clearly what (Powell) wanted to convey at the press conference was that there’s no certainty about what the next move is going to be,” said Gershon Distenfeld, co-head of fixed income at AllianceBernstein.
“The reality is that if the intention was to ease monetary conditions, this did exactly the opposite. Equities are down, the curve is flatter, the dollar higher - all monetary tightening conditions here in the U.S. So they didn’t really accomplish much except getting markets nervous.”

Source: CNBC

Fx on Thursday 1, August 2019 | Dollar falls after Trump imposes more tariffs on China

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Frank van den Bergh | E+ | Getty Images

The dollar fell on Thursday after President Donald Trump said the U.S. would put additional tariffs on China.
The president said additional tariffs of 10% on the remaining $300 billion in Chinese goods would be added in September.
The dollar index fell 0.18% to 98.34.

Earlier, the dollar was stronger after the Federal Reserve sounded cautious on more rate cuts sent the euro to a 26-month low on Thursday, as investors decided a lengthy U.S. easing cycle was unlikely.
In a widely expected move, the U.S. central bank cut rates on Wednesday for the first time since the financial crisis, in response to the growing risk of higher import tariffs and a slowdown in the world’s major economies. But it also signalled that the quarter point cut may not be the start of a lengthy campaign to shore up the economy.
“It’s not the beginning of a long series of rate cuts,” Fed Chairman Jerome Powell said after the Fed’s decision, although he added, “I didn’t say it’s just one rate cut.”
The Fed’s less dovish than expected message triggered a rebound in the dollar, sending the dollar index to a 26-month high of 98.93 on Thursday.

Source: CNBC

FX I Currencies I Dovish Fed spurs dollar's biggest two-day drop in a year.

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Antara Foto | Hafidz Mubarak via Reuters

The U.S. dollar sank against its rivals on Thursday, putting it on track for its biggest two-day drop in a year after the Federal Reserve signaled it was ready to cut interest rates as early as next month.
The Fed joined global peers such as the European Central Bank and the Reserve Bank of Australia this week in signaling that more policy stimulus is needed to maintain growth. That fueled a rally in higher-yielding currencies such as the Australian dollar and the Korean won.
“Certainly the market has taken this as a dovish turn and as a reason to sell dollars,” said Lee Ferridge, head of macro strategy for North America at State Street.
“The theme of the day is going to stay with the dollar under pressure.”
The dollar fell 0.47% against a basket of its rivals to 96.66, putting it on course for its biggest two-day losing streak since February 2018.
It also retreated to a six-month low against the Japanese yen at 107.45, though it had retraced some of those losses early in the North American session.
The sharp fall in the dollar took currency markets by surprise and forced some hedge funds that had built up large long-dollar bets before the rate decision to dump the greenback.
It came under additional pressure after benchmark 10-year Treasury yields slid to their lowest level in 2-1/2 years.
The widespread dollar weakness boosted appetite for risk-oriented currencies, with the euro barreling past the $1.13 line to a one-week high while the Australian dollar and the New Zealand dollar gained more than 0.5% each.
Although the dollar looks weaker in the short term, some investors were skeptical the trend would last.
For “the high-beta currencies - the Aussie dollar, the Kiwi, the Canadian dollar - and the EM currencies, I would be wary of moving into this and thinking this trend is going to last. For the Fed to deliver what the market is pricing in, things have to get worse, and that’s bad for high-beta and EM,” Ferridge said.
The overnight drop in global bond yields has boosted interest rate cut bets across global markets, with money markets pricing in three Fed rate before the end of the year and as many as five cuts until mid-2020.
“Yes, (Powell) opened the door to a July cut. That’s pretty much a done deal. But he didn’t set the groundwork for the other cuts the market was expecting,” Ferridge said.

Source: CNBC

FX | Currencies: Dollar drops after Fed holds rates steady, risk assets gain

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Mark Wilson | Getty Images

The dollar weakened against other major currencies on Wednesday after the Federal Reserve held interest rates steady at its regular meeting.
The dollar index, which measures the currency against a basket of six rivals, was down 0.51% to 97.148. The drop slowed however as the market digested the news and some initial losses were retraced.
Against the euro, the dollar was down 0.46% to $1.124 , and against the pound it was down 0.8% to $1.267.
In response to the announcement, investors moved money out of safe-haven assets like the dollar and U.S. Treasuries and into stocks.
President Donald Trump said on Tuesday he would have an extended meeting with Chinese President Xi Jinping at the Group of 20 summit later this month, raising hopes they can ease tensions in a trade dispute that has damaged the world economy.
U.S. Trade Representative Robert Lighthizer on Wednesday said he and U.S. Treasury Secretary Steven Mnuchin will likely meet Chinese Vice Premier Liu He ahead of the G20 summit in Japan later this month.
UBS Wealth Management said that the dollar could rise against the yen if the Fed were less dovish than expected or the G20 summit ends with a temporary U.S.-China trade war truce
“A bounce toward 110 would make adding short USDJPY positions attractive,” UBS said. “We expect USDJPY to grind lower as U.S. growth slows and as U.S.-China trade tensions persist.”
The yen stood little changed at 108.13 yen per dollar.

Source: CNBC

FX I Currencies I CNBC I Dollar stalled amid Fed meeting; dovish Draghi depresses euro

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John Phillips | Digital Editor | CNBC

The U.S. dollar was little moved on Tuesday as traders held off making large bets before the Federal Reserve’s policy announcement on Wednesday.
The Federal Open Market Committee began its two-day meeting on Tuesday, and will issue a statement and economic projections at the close of Wednesday’s session. The committee is expected to leave its benchmark overnight policy rate unchanged at the current range between 2.25% and 2.5%. But slow employment growth in May, the ongoing trade war with China and weak inflation data have increased expectations for dovish remarks.
The dollar index was last up 0.08% at 97.640, its highest since June 3.
“Markets are largely keeping the powder dry ahead of tomorrow’s Fed announcement,” said Karl Schamotta, chief market strategist at Cambridge Global Payments.
“We’re thinking that we are going to see a relatively dovish announcement, certainly acknowledging that risks have grown since the April meeting,” he said, citing the expectation in April that a U.S.-China trade deal was near.
“A recognition of that worsening environment is very likely, but a rate cut at this point, I don’t think is on the table.”
On Tuesday, China and the United States rekindled trade talks ahead of a meeting next week between Presidents Donald Trump and Xi Jinping, which cheered financial markets but did little to move rate cut expectations.
CME Group’s FedWatch tool puts the probability of a quarter-point interest rate cut on Wednesday at 24.2%, with a 64.7% probability of a cut at its next meeting in July.
The dollar’s rise was in part spurred by a weaker euro , which fell after European Central Bank chief Mario Draghi said policymakers will provide more stimulus if inflation does not pick up. It was last down 0.21% at $1.119, a two-week low.
At a speech in Sintra, Portugal, Draghi said the ECB could still cut rates, adjust its guidance, offer mitigating measures to counter the unwanted side effects of negative rates, and also had “considerable headroom” for more asset purchases.
“Draghi gave his clearest indication yet that we are looking at stimulus coming down the pipe and additional monetary dilution. And that is weighing on the euro’s value relative to the dollar and other global currencies,” said Schamotta.
With benchmark euro zone interest rates already in negative territory and inflation expectations well below central bank forecasts, markets perceived Draghi’s comments as dovish.

Source: CNBC

FX I Currencies I Dollar steady ahead of Fed meeting; low chances of June rate cut

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Athit Perawongmetha | Reuters

The U.S. dollar was roughly unchanged on Monday, hovering near the two-week high set earlier in the session as investors reconsidered how dovish the Federal Reserve is likely to be at this week’s policy meeting.
Broader currency markets were quiet, as traders hesitated to put on large positions before the Fed’s two-day meeting, a meeting of European Central Bank policymakers in Portugal and the Bank of England’s interest rate decision on Thursday.
“It wouldn’t surprise us to see a bit of volatility going into these meeting but ultimately you’re going to see people taking more of a wait-and see approach,” said Charles Tomes, portfolio manager at Manulife Asset Management.
Expectations of a rate cut at the Fed’s June 18-19 meeting have fallen to a probability of 20.8%, according to CME Group’s FedWatch tool. But bets for monetary easing at its July meeting remain elevated, with markets pricing in a 67.9% chance of a 25 basis point cut.
Slow jobs growth in May, dovish comments from Federal Open Market Committee members and a slate of weak inflation data last week pushed rate-hike expectations up.
“It’s probably warranted that you need somewhat of a rate cut priced in. We think the pendulum has swung a little too far, too fast in the short term where the market has gotten ahead of itself pricing in cuts,” said Tomes.
The dollar index hit a two-week high of 97.603 on Monday but was last flat on the day at 97.573. The euro was 0.07% higher at $1.122 as investors awaited policymakers speeches at the European Central Bank meeting in Sintra, Portugal, and Tuesday’s euro zone inflation data.
Against the yen, the dollar was slightly stronger, last up 0.06% to 108.62.
Sterling slid as low as $1.254, its weakest since January, heading for a 2019 low. Investors worry Boris Johnson, the front-runner to replace Prime Minister Theresa May, could put Britain on a path towards a no-deal Brexit.
The Bank of England on Thursday will consider tightening monetary policy. Although BoE chief economist Andy Haldane has said the central bank is nearing a time for the UK to raise rates, no major changes should be expected until Brexit negotiations have finished, said Stephen Gallo, European head of foreign exchange strategy at BMO Capital Markets.
“We expect the (Monetary Policy Committee) to retain it’s tightening bias to some degree, though we wouldn’t rule out a few modest tweaks to acknowledge the worsening global backdrop and weak economic conditions in the euro zone.”

Source: CNBC

FX I Currencies I CNBC I Dollar steady before Fed meeting, G20 summit

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Tomohiro Ohsumi | Getty Images

The U.S. dollar was little changed against the euro on Thursday as investors were reluctant to take large positions before next weeks Federal Reserve meeting and the G20 summit in Japan later this month.
Tepid inflation and weakening economic data in the midst of a U.S.-China trade war has fed expectations that the Federal Reserve is close to cutting interest rates.
That has brought the U.S. dollar down from two-year highs reached in May, yet investors are reluctant to get too bearish on the greenback without further confirmation that rate cuts are near.
I think in order to see the dollar weaken further you need to see some follow through from the Fed on rate easing, said Mazen Issa, senior fx strategist at TD Securities in New York. The Fed is not widely expected to cut rates when it meets on June 18-19, though investors will watch for new signals that a cut may come in July.
Interest rate futures traders are pricing in a 21% chance of a cut in June, and an 85% likelihood of at least one cut in July. The other major catalyst for the dollar in the near term is whether the United States and China will renew trade negotiations at the G20 summit on June 28-29.
With international economic growth slowing, investors are also nervous that U.S. President Donald Trump is now considering tariffs on Japan and Europe. International Monetary Fund Managing Director Christine Lagarde warned that escalating trade tension pose risks that the eurozone could slip into a prolonged period of low growth.
The Australian dollar dropped on Thursday after a mixed set of local jobs data were taken as a green light for a rate cut as soon as July.

Source: CNBC

FX I Currencies I CNBC I Dollar gains as trade tensions, Fed policy in focus

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Athit Perawongmetha | Reuters

The U.S. dollar gained on Wednesday as trade tensions and U.S. interest rate policy remained in focus after President Donald Trump expressed optimism over making a trade deal with China.
The greenback has come under pressure recently as the U.S.-China trade war threatens to derail global economic growth, adding to bets that the Federal Reserve is closer to cutting interest rates.
A sustained decline against the euro has not yet emerged, however, as the U.S. currency still benefits from relatively higher rates than in Europe.
“You still have a very large divergence between the Federal Reserve and the European Central Bank, and that’s really what’s precluding a sustained euro/dollar rally based on the expectations of what the Fed’s going to do going forward,” said Bipan Rai, North American head of FX strategy at CIBC Capital Markets in Toronto.
The dollar was boosted on Wednesday after Trump said that he had a “feeling” that a U.S.-China trade deal could be reached, though he again threatened to increase tariffs on Chinese goods if no agreement is reached.
The euro dropped as Trump said he was considering sanctions over Russia’s Nord Stream 2 natural gas pipeline project and warned Germany against being dependent on Russia for energy.
The dollar briefly fell earlier on Wednesday after the U.S. Labor Department said its consumer price index edged up 0.1% last month.
Excluding the volatile food and energy components, the core CPI nudged up 0.1% for the fourth straight month. The next major economic indicator will be Friday’s retail sales data for May.
The Fed is not widely expected to cut rates when it meets on June 18-19, though investors will be watching for any new signals that a cut is getting nearer.
Interest rate futures traders are now pricing in a 21% chance of a cut in June and an 85% likelihood of at least one cut in July. Investors are also nervous that trade battles will spread to Japan and Europe, with Trump on Tuesday accusing Europe of devaluing the euro zone’s single currency.
“The Euro and other currencies are devalued against the dollar, putting the U.S. at a big disadvantage,” Trump wrote on Twitter. Sterling also dropped on Wednesday after British lawmakers defeated an attempt led by the opposition Labour Party to try to block a no-deal Brexit by seizing control of the parliamentary agenda from the government.

Source: CNBC

FX | Currencies | Dollar flat, poised for fourth month of gains

3 minutes

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A trader shows U.S. dollar notes at a currency exchange booth.
Akhtar Soomro | Reuters

The dollar was flat on Thursday, on track to post a fourth straight month of gains, as the trade stand-off between China and the United States prompted traders to put money into perceived safe currencies including the greenback.
Safe-haven demand lifted the dollar to a two-year high against a basket of currencies last week. Appetite for the greenback was somewhat curbed on Thursday as Wall Street stabilized following steep losses due to the trade worries.
The euro and sterling holding above key support levels at $1.11 and $1.26, respectively, also restrained the greenback’s momentum, analysts said.
“The dollar is getting tired at these levels,” said Dean Popplewell, chief currency strategist at Oanda. “Some people want to take off some of these positions before June.”
At 1:00 p.m., an index that tracks the dollar against six major currencies was flat at 98.14. It reached 98.371 a week ago, marking its strongest level since May 2017.
The S&P 500 was up 0.36%, while benchmark 10-year Treasury yields was 2.8 basis points higher at 2.264%.
The dollar index has increased 0.76% in May, putting it on track for four straight months of gains. The greenback will likely extend its monthly winning streak against the euro, which began in January. Signs of a sagging euro zone economy, together with worries about the rise of euro-sceptic political parties within member countries, have hurt the single currency.
The euro was 0.04% down at $1.1133, within striking distance of $1.11055 hit a week ago, which was a two-year low. The dollar has also remained resilient against the yen, despite the risk averse environment.
The greenback was 0.11% higher at 109.70 yen, rebounding from a two-week low on Wednesday. Analysts said the yen, a safe-haven currency backed by Japan’s status as the world’s biggest creditor nation, remained relatively weak because of domestic demand for dollars.
“As there’s persistent yen-selling and dollar-buying from Japanese investors when the rate approaches the 109.10 yen per dollar level, it’s not easy for the yen to rise above the 109 level,” said Yukio Ishizuki, senior currency strategist at Daiwa Securities.
Sterling was poised for the biggest monthly drop against the dollar in a year as the imminent departure of Theresa May as prime minister deepened fears about a chaotic exit for Britain from the European Union.
On Thursday, the pound was 0.10% higher at $1.2612.

Source: CNBC

FX | Currencies | Swiss franc, yen shine as trade tensions dominate

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The Swiss franc gained across the board on Wednesday and the yen rallied to a two-week high versus the dollar as investors flocked to perceived safe havens assets amid growing fears about trade and growth.
The wave of risk aversion sent sovereign bond yields tumbling across the world. Benchmark U.S. Treasury yields fell to their lowest levels since September 2017 while New Zealand bond yields tumbled to a record low.
The mood darkened after the People’s Daily newspaper, owned by China’s ruling Communist Party, said Beijing was ready to use rare earths for leverage in its trade dispute with the United States. “Don’t say we didn’t warn you,” it added in a strongly worded commentary.
“Concerns about global trade are being felt across asset classes and the currency markets are feeling the pressure,” said Nikolay Markov, a senior economist at Pictet Asset Management.
The Swiss franc, a currency that usually gains when risk aversion is strong, gained against the euro and was within striking distance of a near two-month high hit last week.
The yen edged 0.13 percent lower to 109.50 against the dollar.
The dollar - bolstered by its status as the world’s reserve currency - held its ground against the euro, the pound and other currencies.
It was less than half a percent below a two-year high of 98.37 hit last week against a basket of its rivals. It was broadly steady at 98.03.
“Investors currently regard the greenback as the go-to instrument in a time when global growth is threatening to turn lower on the back of a trade dispute and political fragmentation abroad,” said Konstantinos Anthis, head of research at ADSS.
The U.S. Treasury Department said in a report on Tuesday it reviewed the policies of an expanded set of 21 major U.S. trading partners and found that nine required close attention due to currency practices: China, Germany, Ireland, Italy, Japan, South Korea, Malaysia, Singapore, and Vietnam.
Shusuke Yamada, currency and equity strategist at Bank of America Merrill Lynch, said the report had a muted impact on risk sentiment, adding that investors are watching how the United States and China will deal with their trade dispute going into the G20 meeting in Japan next month.

Source: CNBC

FX | Currencies | Dollar holds steady as US yields hit 19-month low

2-3 minutes

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An employee of a bank counts US dollar notes.
Kham | Reuters

The dollar stayed firm against a basket of currencies on Tuesday, supported by trade and political worries and a strong rise in U.S. consumer confidence, even as longer-dated U.S. bond yields dropped to 19-month lows.
The euro rebounded from session lows as investors were relieve that pro-Europe parties won a majority of European parliamentary seats. Currency trading remained light even as U.S. and U.K.-based traders returned from holidays.
“This is the first full day for the markets after holidays in both U.K. and U.S. yesterday and the economic calendar is nearly barren today adding to the lackluster tone in the trade,” said Boris Schlossberg, managing director of FX strategy at BK Asset Management in New York.
At 2:36 p.m. ET, an index that tracks the greenback against the euro, yen, sterling and three other currencies was 0.3% higher at 97.93.
The dollar strengthened after the Conference Board said its gauge on U.S. consumer confidence rose to 134.1 in May, the strongest since November. Analysts had forecast a reading of 130.00.
Earlier, benchmark 10-year Treasury yields fell to 2.273% after U.S. President Donald Trump signaled the United States and China were far from a trade deal. It was the lowest 10-year yield since October 2017.
Investors have been loading up on safe-haven U.S. government debt due to trade worries and political uncertainty. Italian Deputy Prime Minister Matteo Salvini, whose far-right League triumphed in European elections on Sunday, said the European Commission could fine Italy 3 billion euros for breaking EU debt and deficit rules, a comment that weighed on the single currency.
The euro has recovered, holding steady at $1.117. The euro hit a near 23-month low of $1.11055 last week.
European leaders now meet in Brussels to begin the process of filling a number of top EU posts, from the head of the European Commission to the European Central Bank.
The yen was little changed at 109.47 per dollar as U.S. President Donald Trump said on Monday he expected Japan and the United States to announce a trade agreement “probably in August.”

Source: CNBC

FX I Currencies I Dollar at two-year high, safe havens up on stormy global economy

David Reid

3-4 minutes

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Torsakarin | iStock / 360 | Getty Images

The dollar hit its highest level in two years and the yen rose half a percent on Thursday as economic and political uncertainties swept through Europe and Asia, pinning down the euro and the yuan.
Worries over German manufacturing, the impact of a trade war on Asian economies and deepening concerns over Brexit and European parliamentary elections have broadly curbed risk appetite and sent investors to perceived safe-haven assets.
“Safe havens were the currencies of choice as confidence in global growth faltered,” said Joseph Manimbo, senior market analyst at Western Union Business Solutions. “The greenback and safer rivals from Japan and Switzerland were in the driver’s seat.”
While the United States is not without its own worries - namely trade conflict with China - investors see the greenback as a relative safe haven because of its preeminence in the global economy and the extra cushion of having some of the highest interest rates in the developed world.
The dollar hit a high of 98.371 against a basket of six major currencies, its highest since May 2017. If it maintains its path, the dollar will be on track for a fourth consecutive month of gains.
“Certainly the dollar has been acting like something of a safe haven even though the Fed has been more dovish than has been expected,” said Neil Mellor, FX strategist at BNY Mellon.
Activity in Germany’s services and manufacturing sectors fell in May, a survey showed on Thursday, reflecting the toll that unresolved trade disputes are having on Europe’s largest economy.
While a similar figure for the euro zone as a whole was healthier, it still undershot expectations across the board, hurting the single currency.
The euro dipped to its lowest in a month at $1.111 before recovering slightly to $1.114.
Compounding these worries, European parliamentary elections began on Thursday with euroskeptic parties expected to do well, raising concerns about the single currency’s stability.
The yen also advanced broadly as persistent U.S.-China trade fears and Brexit concerns fanned risk aversion. The yen was 0.57% firmer at 109.71 to the dollar, having pulled back from a two-week low of 110.675 plumbed on Tuesday.
Reports that the United States could impose restrictions on Chinese technology company Hikvision renewed market jitters about trade on Wednesday, reversing a relief rally that followed Washington’s move to temporarily ease curbs against Huawei Technology Co Ltd.
Brexit uncertainty has set sterling up for its 14th straight day of losses against the euro - its longest losing streak in the 20-year history of the single currency.

Source: CNBC

FX | Currencies | Dollar holds near one-month high ahead of Fed minutes

Tucker Higgins

3-4 minutes

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Mohamed Abd El Ghany | Reuters

The U.S. dollar held near a one-month high on Wednesday amid heightened trade tensions between the United States and China and ahead of the release of Federal Reserve meeting minutes which may provide more clues on why the central bank stood pat on interest rates earlier this month.
At its May 1 meeting, the Federal Open Market Committee kept interest rates steady and signaled little appetite to adjust them any time soon, taking note of strong jobs growth.
Still, the minutes may not add much to what the market has learned from a slew of comments from Fed members this week.
In Hong Kong earlier Wednesday, James Bullard, president of the Federal Reserve Bank of St. Louis, said further weakness in inflation could prompt the Fed to cut rates, even if economic growth maintains its momentum.
Bullard’s comments echoed those made by other Fed members this week, including the Chicago Fed’s Charles Evans, also a voting member of the FOMC.
“We expect the FOMC minutes from the May meeting to be rather uneventful for the foreign exchange market, given the deluge of Fed speak investors have received in recent sessions,” said Stephen Gallo, European head of foreign exchange strategy at BMO Capital Markets.
The minutes will not reflect a further ratcheting up of U.S.-China trade tension since the meeting, which may also limit its impact on markets.
Officials in the world’s two largest economies dug in their heels as tensions intensified since Washington last week blacklisted China’s Huawei Technologies Co Ltd.
China must prepare for difficult times as the international situation is increasingly complex, President Xi Jinping said in comments on Wednesday.
“Everyone is digging in for a long fight,” Brown Brothers Harriman strategists said in a note.
Against a basket of rivals, the dollar was steady at 98.043 and just shy of a one-month high of 98.134.
While investors in risky assets heaved a sigh of relief after the United States eased trade restrictions on Huawei, the lack of a significant breakthrough has kept them on edge.
Stronger safe-haven assets, namely the Japanese yen and Swiss franc up 0.12% and 0.23% respectively, indicated lingering skepticism.
Sterling was the only notable loser going into the North American session down 0.57% to its lowest since Jan.4, and last at $1.263.
Political uncertainty in Britain deepened as Prime Minister Theresa May’s final attempt to seal a Brexit deal failed to win over opposition lawmakers and many in her own party.
Elsewhere, the euro was steady at $1.116 before a speech by European Central Bank chief Mario Draghi in Frankfurt.

Source: CNBC