Dollar falls broadly on soft U.S. retail sales

Market Review - 15/10/2018  23:45GMT  

Dollar falls broadly on soft U.S. retail sales

The greenback ended lower against majority of its peers on Monday as U.S. Treasury yields eased after hitting multi-month highs recently and release of downbeat U.S. retail sales also dampened demand for the buck.  
  
The Commerce Department said on Monday retail sales edged up 0.1 percent last month after a similar gain in August. Economists polled by Reuters had forecast retail sales increasing 0.6 percent in September. Retail sales in September rose 4.7 percent from a year ago.  
  
Versus the Japanese yen, dollar met renewed selling at 112.24 and dropped to 111.93 in Asian morning. Price continued to ratchet lower on usd's broad-based weakness and dropped to a 4-week trough of 111.63 in European morning. Despite a brief rebound to 111.92 at New York open on short covering, price retreated again to 111.67 in New York morning after release of downbeat U.S. retail sales before moving narrowly in subdued New York afternoon session.  
  
Although the single currency opened lower in tandem with the British pound and dropped to 1.1537 in New Zealand, price erased its losses and gained to 1.1556 in Asian morning. Price continued to ratchet higher in Europe due partly to cross-buying of euro especially vs sterling and hit session highs of 1.1606 in New York morning on usd's weakness following release of downbeat U.S. retail sales data. Euro then retreated to 1.1574 in New York afternoon on profit taking b4 moving narrowly.  
  
The British pound opened lower and dropped to an intra-day low at 1.3080 in New Zealand as Brexit talks over the weekend ended in a stalemate. However, cable erased its intra-day losses and gained to 1.3130 at European open. Cable continued to ratchet higher on usd's broad-based weakness and hit intra-day high of 1.3182 ahead of New York open before retreating to 1.3127 in New York morning. Price then rebounded again to 1.3169 due partly to positive comments from U.K. PM May.  
  
Reuters reported the stubborn problem of Britain's land border with Ireland thwarted a drive to clinch a Brexit deal before a European Union summit this week, as negotiators admitted defeat after marathon talks and pressed pause for the coming days.  
  
EU negotiator Michel Barnier said after meeting British Brexit Secretary Dominic Raab that they could still not bridge a gap between his "backstop" demands that Northern Ireland stay in the EU's economic zone if there is a risk that border checks with EU member Ireland could revive conflict, and London's rejection of any checks on trade between the province and the British mainland.  
  
Reuters reported Prime Minister Theresa May said on Monday that Britain and the European Union should not allow their disagreements over the Irish border leave the two sides facing a no-deal Brexit.  
  
"We cannot let this disagreement derail the prospects of a good deal and leave us with a no deal outcome that no-one wants," May told parliament.  
  
In other news, Reuters also reported British negotiators urged the EU to accept assurances Britain will effectively stay in a customs union with the EU to avoid a hard border with Ireland and make a controversial "backstop" for Northern Ireland unnecessary, EU diplomats said on Monday.  
  
But, said diplomatic sources briefed on Sunday's breakdown in Brexit talks, the European Union insisted that, since no firm treaty obligation on such a future EU-UK customs union can be sealed before Britain leaves the bloc in March, an insurance policy to keep Northern Ireland alone inside the EU's economic zone is still vital -- something London says it cannot accept.  
  
Data to be released on Tuesday:  
  
New Zealand CPI, GDT price index, Australia Westpac leading index, China PPI, CPI, Germany import price, ZEW economic sentiment, ZEW current conditions, Italy industrial orders, industrial sales, CPI, CPI (EU norm), trade balance, UK ILO unemployment rate, employment change, average weekly earnings, DCLG house price index, EU trade balance, and U.S. PCE, redbook, industrial production, capacity utilization, manufacturing output, JOLTS job openings, NAHB housing market index.