Dollar catches a bid on rising U.S. Treasury yields, sterling tumbles on BoE Carney's dovish comments

Market Review - 19/04/2018   23:38GMT  

Dollar catches a bid on rising U.S. Treasury yields, sterling tumbles on BoE Carney's dovish comments

The greenback rose across the board on Thursday, led by intra-day sharp decline in gbp/usd in New York afternoon due to dovish comments by Bank of England Governor Mark Carney in an interview with BBC News as well as strong gain in U.S. Treasury yields (benchmark 10-year yield rose to a near one-month high of 2.934%) and investors were optimistic that Federal Reserve will raise interest rates at least three times this year also supported dollar's strength.   
  
Versus the Japanese yen, dollar found renewed buying at 107.18 in Australia and rose to 107.52 in Asian morning before retreating to 107.27 in European morning. However, price rebounded to 107.50 in New York on rising U.S. Treasury yields, price later retreated to 107.25 on cross-buying of yen esp. verus the sterling before rebounding back to 107.50.  
  
Despite rising to 1.2400 in European morning, the single currency erased intra-day gains and fell to 1.2355, then ratcheted lower to session lows of 1.2329 in New York on broad-based usd's strength and selloff in cable.  
  
The British pound went through a roller-coaster ride. Although cable briefly edged up to 1.4218 in European morning, price fell to 1.4161 after release of downbeat UK retail sales before cross-buying in sterling lifted price to 1.4248 (Reuters) at New York open. However, price met renewed selling and fell to 1.4184 on renewed Brexit concern, then intra-day decline accelerated after Bank of England Governor Mark Carney's interview with BBC News in New York afternoon and tumbled to 10-day low of 1.4070.  
  
Reuters reported Bank of England Governor Mark Carney on Thursday dampened widespread expectations for an interest rate hike in May, pointing out there were also "other meetings" this year.  
  
Sterling dropped almost a cent against the U.S. dollar to its lowest level since April 9 on the back of the comments, in which Carney highlighted "mixed" economic data.  
  
"I don't want to get too focused on the precise timing, it is more about the general path," Carney told BBC news, while adding that a rate hike this year was "likely".  
  
UK retail sales fell 1.2% in March the Office for National Statistics said on Thursday. This was compared to 0.8% in the previous month. Economists had forecast a decline of 0.5%. Year-over year, retail sales rose 1.1% from 1.5% the previous month. Economists had forecast a rise of 2.0%  
  
Reuters reported Britain's lower house of parliament will debate staying in a customs union with the European Union next week, stepping up pressure on Prime Minister Theresa May to change her Brexit blueprint.   
  
Opposition Labour and pro-EU Conservative lawmakers have backed having a so-called backbench debate next Thursday after the upper house dealt a blow to May by challenging her decision to rule out staying in the bloc's customs union.   
  
Bank of England Governor Carney in BBC News interview and said; 'we have had some mixed economic data; uncertainty around Brexit has prevented what would otherwise have been a surge in investment in UK economy; productivity is not increasing, which will limit the rate at which people's wages can pick up'.   
  
In other news, Reuters reported U.S. tariffs on steel and aluminium imports would not dampen German exports if an exemption granted to the European Union expires on May 1 without a permanent solution, Germany's leading economic institutes said on Thursday. But they warned in a report that an escalation of a trade dispute between major economic blocs would have a big impact on German exports and the economy, which they expect to grow by 2.2 percent this year and by 2.0 percent in 2019.  
  
On the data front, Reuters reported U.S. initial claims for state unemployment benefits fell 1,000 to a seasonally adjusted 232,000 for the week ended April 14, the Labor Department said on Thursday. Data for the prior week was unrevised. Economists polled by Reuters had forecast claims falling to 230,000 in the latest week.   
  
Data to be released on Friday :  
  
Japan national CPI, core CPI, Germany producer prices, Canada CPI, CPI BoC core, core CPI, retail sales, retail sales ex-autos, and EU consumer confidence