Dollar gains on easing of U.S.-China trade tension, Italy's budget deficit concerns knock euro

Market Review - 14/05/2019  23:31GMT  

Dollar gains on easing of U.S.-China trade tension, Italy's budget deficit concerns knock euro

The greenback ended broadly higher against its major peers on Tuesday as positive comments from U.S. President Donald Trump that the U.S.-China trade talks have not collapsed gave the usd support. The single currency fell on budget defict comments from Italy's Deputy Prime Minister Matteo Salvini while sterling also took a hit after weak wage growth data and standoff in cross-party talks.  
U.S. President Donald Trump said on Tuesday trade talks with China had not collapsed, characterizing the trade war between the world's two largest economies as "a little squabble."   Reuters reported U.S. Treasury Secretary Steven Mnuchin will plan for another trade meeting in China at some point soon, a Treasury spokesman said on Tuesday, adding to President Donald Trump's earlier statements that U.S. dialogue with Beijing was continuing.  
  
Versus the Japanese yen, dollar found renewed buying at 109.15 in Australia and rallied to 109.63 in Asian morning on cross-selling in jpy as well as U.S. President Trump's positive trade comments and then ratcheted higher to session highs at 109.77 in European morning before retreating to 109.45 at New York open on profit-taking, price last traded at 109.59 near the close.  
  
President Donald Trump said on Monday he was optimistic about resolving the U.S. trade dispute with China.  
  
Although the single currency traded with a firm bias and rose from 1.1219 in Australia to session highs at 1.1246 (Reuters) in European morning, euro erased its gains and fell to intra-day low at 1.1204 at New York open on Italy's Deputy Prime Minister Matteo Salvini's budget deficit comments and later hit 1.1201 near the close.  
  
Reuters reported Italy is ready to break European Union budget rules if necessary to spur jobs, Deputy Prime Minister Matteo Salvini said on Tuesday.   "If we need to break some limits, like the 3% (deficit-to-GDP ratio) or 130-140% (debt-to-GDP ratio), we're ready to go ahead. Until we arrive at 5% unemployment, we will spend everything that we should and if someone in Brussels complains, that won't be our concern," he told reporters.   
  
The British pound initially recovered to 1.2970 at Asian open before falling to 1.2923 in European morning. Despite rebounding to 1.2964, renewed selling emerged and knocked price down to a 2-week at 1.2909 in New York morning on delayed reaction to weak UK wage growth data, price later edged lower to 1.2903 near the close.  
Reuters reported in the January-March period, British's total earnings, including bonuses, rose by an annual 3.2%, slowing from 3.5% in the three months to February and weaker than a forecast of 3.4% in the Reuters poll.  In other news, Reuters reported Britain does not need a national election or another Brexit referendum right now, Foreign Secretary Jeremy Hunt said on Tuesday.   
Hunt said it was not impossible to get a Brexit deal with Labour but that it was in both parties' political DNA not to trust each other. He said both parties would be "crucified" at a general election if they failed to resolve Brexit.   
When questioned whether he would put a no-deal Brexit on the table at some point, Hunt said this parliament did not want a no-deal Brexit. He said Britain needed a pro-business immigration policy after Brexit.   
  
On the data front, Reuters reported the mood among German investors deteriorated unexpectedly in May, a survey showed on Tuesday, with the escalating trade dispute between China and the United States clouding the growth outlook for Europe's largest economy.   
The ZEW research institute said its monthly survey showed economic sentiment among investors fell to -2.1 from 3.1 in April. Economists had expected an increase to 5.0.   
  
Data to be released on Wednesday :  
  
Australia Westpac consumer sentiment, wage price index, China industrial output, retail sales, Japan construction orders, Housing starts, Germany GDP, France CPI, Italy industrial orders, industrial sales, EU employment, GDP, U.S. MBA mortgage application, NY Fed manufacturing index, retail sales, industrial production, capacity utilization, manufacturing output, business inventories, NAHB housing market index, and Canada CPI.