Dollar climbs to 5-month high before paring gain due to falling U.S. yields

Market Review - 19/05/2018  14:32GMT  

Dollar climbs to 5-month high before paring gain due to falling U.S. yields

Although the greenback continued its recent winning streak and hit afresh 5-month highs, price pared intra-day gains in New York morning due to strong retreat in U.S. yields and ended mixed. The benchmark 10-year Treasury yield hit a fresh near 7-year highs of 3.1279% in Asian morning before tumbling to 3.0559% near New York close. Euro also weakened to a fresh 5-1/2 month trough of 1.1750 before staging a minor recovery.  
  
Versus the Japanese yen, despite edging up to 111.00 in Asian morning then to a 3-1/2 month peak of 111.08 in European afternoon, price erased intra-day gains and fell to 110.61 at New York midday on falling U.S. Treasury yields. Price last traded around 110.79 near the close.  
  
Although the single currency initially recovered to 1.1822 in European morning, price met renewed selling and tumbled to a fresh 5-1/2 month trough of 1.1750 in New York morning on continued political concern about Italy's new coalition government before rebounding to 1.1789 due to profit-taking ahead weekend.  
  
Reuters reported the anti-establishment 5-Star Movement and far-right League on Friday published their joint government programme, promising a major spending spree that will likely put Italy on a collision course with the European Union.  
  
Although the British pound gained to 1.3528 in European morning, cable fell 1.3473 in tandem with euro in European morning and then ratcheted lower to session lows of 1.3455 in New York morning as investors were confused if Britain will stay in EU's custom union or not after Brexit before rebounding to 1.3489 on broad-based usd's retreat.  
  
UK PM spokeswoman said; 'new Brexit backstop plan is a 'fallback'; that Theresa May doesn't want or expect new customs backstop to happen'.  
  
In other news, Reuters reported China's foreign ministry said on Friday it was not true that the country had offered to cut its trade surplus with the United States by $200 billion. Ministry spokesman Lu Kang made the comment at a daily news briefing, adding that trade talks with the United States were constructive and continue.   
  
On the data front, Germany producer prices monthly basis rose from 0.1% to 0.5% in April beating estimate of 0.3%. On an annualized basis, prices grew in 2.0% versus prior month's 1.9%, which was also higher than expectation of 1.8%.   
  
Data to be released this week :  
  
New Zealand retail sales, Japan exports, imports, trade balance, Swiss market holiday, France market holiday, Germany market holiday, U.K. Rightmove house price, Canada market holiday, and U.S. National activity index on Monday.  
  
U.K. PSNB, PSNCR, Canada wholesale sales, and U.S. redbook, Richmond Fed manufacturing on Tuesday.  
  
Japan Nikkei manufacturing PMI, all industry activity, France non-farm payrolls, ILO unemployment rate, Markit manufacturing PMI, Markit services PMI, Germany GDP, Markit manufacturing PMI, Markit services PMI, EU Markit manufacturing PMI, Markit services PMI, consumer confidence, U.K. core CPI, CPI, RPI, Core RPI, PPI input price, PPI output price, PPI core output, CBI distributive trades, and U.S. MBA mortgage application, building permits, Markit manufacturing PMI, Markit services PMI, new home sales on Wednesday.  
  
New Zealand imports, exports, trade balance, Australia Westpac leading index, Germany Gfk consumer confidence, France business climate, U.K. retail sales, core retail sales, and U.S. initial jobless claims, monthly home price, existing home sales, Kansas Fed manufacturing activity on Thursday.  
  
Japan Tokyo core CPI, CPI, EU consumer confidence, Swiss industrial orders, Germany Ifo business climate, Ifo current conditions, Ifo expectations, Italy trade balance non-EU, U.K. GDP, BBA mortgage approvals, U.S. durable goods, durables ex-transportation, durables ex-defences, University of Michigan sentiment, and Canada budget balance on Friday.