Dollar gains on renewed trade tensions, sterling tumbles due to fears of hard Brexit: Aug 07, 2018

Market Review - 06/08/2018  23:38GMT 

Dollar gains on renewed trade tensions, sterling tumbles due to fears of hard Brexit

The greenback climbed broadly against majority of its peers on Monday due to trade war tension between United States and China before paring intra-day gains in New York afternoon trading. Sterling tumbled to an 11-month low on increasing concerns over the possibility of a hard Brexit.  

Versus the Japanese yen, dollar initially moved sideways in New Zealand, then edged up to 111.36 in Asia morning and despite a brief retreat to 111.20 in European morning, broad-based usd's strength lifted price to +session highs at 111.53 at New York open before retreating on falling U.S. Treasury yields.  

The single currency went through a volatile session. Euro traded on the back foot in Asia and fell to 1.1550 at European due to downbeat German industrial orders data. Despite a recovery to 1.1569, price met renewed selling and fell in tandem with sterling to a fresh 1-month trough at 1.1530 ahead of New York open before rebounding to 1.1570 on short-covering, the pair last traded at . 
1.1553 near the close.  

Reuters reported German industrial orders plunged by more than expected in June, posting the steepest monthly drop in nearly a year and a half, data showed on Monday, suggesting that factories in Europe's largest economy could shift into a lower gear in the coming months.   

The Federal Statistics Office said contracts for 'Made in Germany' goods fell by 4.0 percent after an increase of 2.6 percent the previous month.   

This was the biggest fall in German industrial orders since January 2017. The reading undershot a Reuters poll of analysts who had predicted a 0.4 percent decrease.   

Although the British pound opened higher in New Zealand and edged higher to 1.3014, price met renewed selling in Asia and intra-day fall accelerated in European morning on renewed Brexit concern as traders sold sterling broadly after UK Trade Minister Liam Fox said over the weekend the odds of Britain leaving the EU without agreeing on a deal stood at 60-40, Cable later tumbled to an 11-month low at 1.2920 at New York open before rebounding to 1.2951 on short-covering.  

Reuters reported British voters approval of Prime Minister Theresa May's handling of Brexit negotiations has fallen to 22 percent, according to the ORB International pollster on Monday, the lowest figure it has recorded.   

Approval of the government's handling of Brexit talks rose as high as 55 percent in the first half of 2017 but has since fallen as the government struggles to strike a deal on Britain's future relationship with the European Union.   

According to the poll of around 2,000 adults, 60 percent of voters were not confident May would get the right deal, up from 56 percent last month while 22 percent thought she would get the right deal and the rest didn't know.  

In other news, St. Louis Fed President James Bullard (non-voter) on CNBC TV Squawk Box Europe live said; 'waiting for a 'inevitable recession' is wrong; U.S. firms concerned about trade situation; not surprised nominal wage growth in 2% range; U.S. yield curve inversion a real possibility; yield curve inversion deserves attention.'  

On the data front, Reuters reported investor morale in the euro zone improved for the second month running in August, a survey showed on Monday, as concerns about an all-out trade war between the European Union and the United States subsided.   

Sentix's index for the euro zone rose to 14.7 from 12.1 in July. The Reuters consensus forecast was for a rise to 13.5.  

Data to be released on Tuesday : 

Australia AIG construction index, UK BRC retail sales, Japan household spending, RBA interest rate decision, Japan's coincident index, leading indicator, Germany industrial output, exports, imports, trade balance, current account, France current account, trade balance, import, export, New Zealand GDT price index, U.S. Redbook sales, JOLTS job openings, and Canada Ivey PMI.