Dollar rebounds broadly on short-covering ahead of weekend: Aug 22, 2016

Market Review - 20/08/2016 02:32 GMT 
 
Dollar rebounds broadly on short-covering ahead of weekend

The dollar rebounded against the other major currencies on Friday as hopes of U.S. interest rate hike in coming months supported the greenback.

Versus the Japanese yen, dollar found support at 99.87 in Australia on Friday and then rebounded to 101.46 in Asia before retreating to 100.04 in European morning. Later, price staged another bounce to 100.38 in New York morning but then briefly dropped to 100.03 before moving sideways for rest of session.

The single currency retreated again after a bounce from Asian low at 1.1327 to 1.1349 in European morning due to broad-based dollar's short-covering rebound and later fell to 1.1304 on active cross-selling in euro versus other major currencies. In New York morning, price briefly recovered to 1.1333 and then moved sideways.

Elsewhere, the British pound came under renewed selling pressure against the dollar after a brief rise to a fresh 1-week peak at 1.3186 in Australia and fell to 1.3128 in Asia, then 1.3110 in European morning. Later, despite a recovery to 1.3146, a media report showing a possibility to trigger Article 50 by next spring led to broad based decline in sterling and cable fell sharply lower to 1.3023 in New York morning before staging a short-covering rebound to 1.3082 in New York afternoon.

Bloomberg news reported on Friday, Prime Minister Theresa May's team is still leaning toward the first part of 2017 as the best moment to trigger the start of formal talks over the U.K.'s withdrawal from the European Union, according to two British officials.

While reports in the U.K. media recently suggested May could wait until the end of 2017 before opening two years of negotiations, she is sympathetic to the case for acting by April at the latest as Germany and France prepare for elections and pro-Brexit campaigners at home warn against delay, said the officials, who asked not to be named discussing private conversations.

A March summit of European leaders could provide the right setting for invoking Article 50 of the Lisbon Treaty, which lays out how a country quits the EU, one of the officials said.

On the data front, Reuters news reported on Friday that Japanese manufacturers' mood soured in August to its lowest since 2013 when the central bank embarked on aggressive monetary easing, a Reuters poll showed, reflecting the pain caused by a rising yen and highlighting the huge task facing policymakers to generate growth. The sentiment index for manufacturers fell to 1 from 3 in July, hurt by manufacturing industries including cars, food, machinery and electronics. It was seen bouncing to 6 in November. The service-sector index rose to 18 from 15 in July, reflecting gains in retailers, real estate and other services. The index was seen rising further to 19 in November.

Data to be release this week:

U.S. national activity index and Canada wholesale trade on Monday.

Japan Nikkei manufacturing PMI, Swiss trade balance, exports, imports, France Markit manufacturing PMI, Markit service PMI, Germany Markit manufacturing PMI, Markit service PMI, Eurozone Markit manufacturing PMI, Markit service PMI, consumer confidence, U.K. CBI industrial trends orders, U.S. Redbook index, new home sales and Richmond manufacturing index on Tuesday.

New Zealand imports, exports, trade balance, Australia construction work done, Germany GDP, Swiss consumption indicator, U.K. mortgage approval, U.S. mortgage application, housing price index and existing home sales on Wednesday.

France business climate, industrial investment, Swiss industrial production, Germany IFO report, U.K. CBI distributive trades survey, U.S. durable goods, initial jobless claims and Kansas Fed manufacturing activity on Thursday.

Japan CPI, Germany Gfk consumer confidence, U.K. GDP, business investment, U.S. GDP, personal consumption expenditure, goods trade balance, wholesale inventories, retail inventories and Reuters/Michigan consumer sentiment index on Friday.