Dollar drops broadly after dovish comments by Fed officials

Market Review - 16/11/2018  23:49GMT  

Dollar drops broadly after dovish comments by Fed officials

The greenback sharply fell in New York morning and ended lower across the board on Friday after dovish comments from Fed's newly appointed Vice Chair, Richard Clarida as well Dallas Fed President Robert Kaplan about slowing global economic growth, which triggered broad-based selling in dollar as doubt increased over the number of future rate increases.  
  
Richard Clarida, the newly appointed vice chair of the Federal Reserve said U.S. interest rates are nearing Fed estimates of a neutral rate, and being at neutral "makes sense."   
  
In a CNBC interview on Friday at the U.S. central bank's Washington headquarters, Clarida said he does not believe the Fed has raised rates too far or too fast, but said that it needs to be particularly data-dependent as rates near the 2.5 percent to 3.5 percent range that Fed officials estimate as a neutral level that neither stimulates nor brakes a healthy economy.   
  
Reuters reported Dallas Fed's Kaplan on Fox Business said global growth will be a little bit of a headwind, may spill to U.S.  
  
Versus the Japanese yen, dollar remained under pressure in Asia and fell to 113.22 on safe-haven jpy buying after news reported that North Korean leader Kim visited the test site of a new tactical weapon then tumbled to session lows at 112.6 in New York on broad-based usd's weakness on dovish comments from Fed's officials as well as falling U.S. Treasury yields. Price last traded at 112.82 near the close.  
  
Reuters reported North Korean leader Kim Jong Un visited the test site of a new tactical weapon in his first public "field inspection" since last year, hailing it as a "display of our rapidly-growing defence capabilities," state media said on Friday.   
  
The single currency traded with a firm bias in Asia and climbed in tandem with sterling to 1.1367 in European morning before falling to 1.1321 on dovish comments from ECB's President Mario Draghi. However, price rebounded to 1.1346 in New York morning and despite a brief but sharp retreat to 1.1326 on report that disciplinary action EU Commission will be made to Italy, euro rallied to a 1-week high at 1.14212 following remarks from Fed's Clarida and Kaplan.  
  
Reuters reported the European Commission will move next week to discipline Italy over its 2019 budget after Rome defied EU objections to its plans to borrow and spend more next year, three officials close to the process said on Friday.   
  
Reuters reported the European Commission will move next week to discipline Italy over its 2019 budget after Rome defied EU objections to its plans to borrow and spend more next year, three officials close to the process said on Friday.   
  
The British pound went through another roller-coaster ride. Although cable recovered to 1.2833 in European morning after Thursday's selloff on UK's political turmoil, price sharply retreated to 1.2777 on news that vote of no confidence against PM May had been submitted by lawmakers, however, the pair found renewed buying and swiftly rallied to 1.2832 after Michael Gove remained as Environment Minister in PM May's government then ratcheted higher to session highs at 1.2878 in New York morning on usd's broad-based weakness and retreated again to 1.2811 due to cross-selling in sterling especially versus euro.  
  
Reuters reported the 48 letters from Conservative lawmakers required to trigger a vote of no confidence in Prime Minister Theresa May have been submitted, the editor of BrexitCentral said on Friday, citing a single source who he said was always previously reliable.   
  
In other news, Reuters reported Chicago Federal Reserve Bank President Charles Evans on Friday said the U.S. central bank is "in a good place" to continue making adjustments to bring short-term interest rates back up to a neutral setting.   
  
On the data front, Eurostat said that consumer prices in the 19 countries sharing the euro rose 2.2 percent year-on-year in October after a 2.1 percent increase in September and a 2.0 percent gain in August. It was the biggest increase since December 2012.  
  
On the month, headline inflation went up by 0.2 percent in October, in line with market expectations, but slowing from 0.5 percent in September.  
  
Data to be released this week :    
New Zealand PPI, Japan exports, imports, trade balance, UK Rightmove house price, EU current account, construction output and U.S. NAHB housing market index on Monday.  
  
France ILO unemployment rate, Germany producer prices, Swiss exports, imports, trade balance, UK CBI trends orders, New Zealand GDT price index, and U.S. building permits, housing starts, redbook on Tuesday.  
  
Australia Westpac leading index, Japan all industry activity index, UK PSNB, PSNCR, Canada wholesale sales, and U.S. MBA mortgage application, durable goods, durables ex-transportation, durables ex-defense, initial jobless claims, existing home sales, leading indicator, University of Michigan sentiment on Wednesday.  
  
U.S. market holiday, Japan national CPI, France business climate, Swiss industrial production, and EU consumer confidence on Thursday.  
  
Japan market holiday, Nikkei manufacturing PMI, Germany GDP, Markit manufacturing PMI, Markit services PMI, France Markit manufacturing PMI, Markit services PMI, Italy trade balance, EU Markit manufacturing PMI, Markit services PMI, Canada CPI, retail sales, and U.S. Markit manufacturing PMI, Markit services PMI on Friday.