Market Review - 12/07/2018 23:29GMT
Dollar climbs vs yen and Swiss franc as gain in U.S. stocks boosted risk sentiment
The greenback ended higher versus the Japanese yen and the Swiss franc on Thursday as broad-based gain in U.S. stocks boosted risk appetite. Elsewhere, the British pound recovered from a 1-week low after Brexit white paper was published, suggesting UK is headed for a "soft Brexit".
The U.S. Labor Department said on Thursday its Consumer Price Index edged up 0.1 percent as gasoline price increases moderated and apparel prices fell. The CPI rose 0.2 percent in May.
In the 12 months through June, the CPI increased 2.9 percent, the biggest gain since February 2012, after advancing 2.8 percent in May.
Excluding the volatile food and energy components, the CPI rose 0.2 percent, matching May's gain. That lifted the annual increase in the so-called core CPI to 2.3 percent, the largest rise since January 2017, from 2.2 percent in May.
Economists polled by Reuters had forecast both the CPI and core CPI rising 0.2 percent in June.
Versus the Japanese yen, despite a minor pullback to 111.92 in Australia, dollar found renewed buying and traded with a firm bias in Asia and gained to 112.38 in Asia, then ratcheted higher to a fresh 6-month peak at 112.63 in Europe on rising U.S. Treasury yields and easing trade tensions between U.S. and China before retreating 112.37 in New York on profit-taking.
The single currency went through another roller-coaster ride. Although euro moved narrowly in Asia and edged up to 1.1693 in European morning, renewed selling emerged and knocked price down to session lows at 1.1650 on Fed's Mester's comments and mildly dovish ECB meeting minutes. However, euro jumped to 1.1687 at New York open after U.S. inflation data barely rose, then ratcheted higher to 1.1696 on falling Italy bond yield before paring intra-day gain in New York afternoon.
In an interview with WSJ, Cleveland Fed's Mester said; 'that strong economy justifies two more rate hikes this year; strong economic growth, low unemployment rate and stable inflation; that economy can certainly handle two more rate hikes this year; expects the Fed to raise rates to 3% to reach a neutral level.'
Reuters reported euro zone interest rates will remain at their current level for as long as needed to raise inflation and the European Central Bank's guidance should be seen as "open-ended", ECB policymakers concluded in June according to minutes of their meeting published on Thursday.
The British pound went through a hectic trading session. Although price dipped to 1.3188 in Asian morning, cable rebounded in tandem with euro to 1.3225 in European morning before falling to a fresh 1-week low at 1.3181 on comments from Fed's Mester. However, price swiftly pared its losses and jumped to session highs at 1.3245 at New York open after release of Brexit white paper suggesting UK is en route to a "soft Brexit" before retreating to 1.3209. The pound later erased intra-day gain and last traded at 1.3206 near the close.
Brexit white paper states; 'Reuters news, Brexit white paper states; UK government will end free movement of people and the direct jurisdiction of European court of justice over Britain after Brexit; UK government plans joint committee to resolve disputes about the application of common rule book; UK government is not proposing that the EU applies the UK's tariffs and trade policy at its border for goods intended for UK; UK government plans a "phased approach" to the implementation of new facilitated customs arrangement; UK government plans to allow citizens to travel freely without a visa for tourism and temporary business activity after Brexit; UK government wants to pursue immigration policy that supports businesses.'
In other news, Reuters reported U.S. President Donald Trump did not threaten to pull out of NATO at the second day of a summit on Thursday, despite a tough rebuke of allies for spending too little on defence, two NATO sources told Reuters.
On the data front, the number of individuals filing for initial jobless benefits in the week ending July 7 declined by 18,000 to a seasonally adjusted 214,000 from the previous week's total of 232,000, the U.S. Department of Labor said. Analysts expected jobless claims to be 225,000 last week.
Data to be released on Friday :
New Zealand manufacturing PMI, China exports, imports, trade balance, Japan industrial production, capacity utilization, Germany wholesale price, France nonfarm payrolls, Swiss producer/import price, and U.S. import prices, export prices, University of Michigan sentiment.
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