Dollar ends broadly lower on profit taking after brief jump following Fed's hawkish tilt

Market Review - 13/06/2018  23:24GMT  

Dollar ends broadly lower on profit taking after brief jump following Fed's hawkish tilt

Although the greenback briefly jumped against majority of its peers on expected hawkish Fed rate hike, dollar quickly erased its intra-day gains and fell broadly due to broad-based profit taking.  
  
The Fed raised its target interest rate to 1.75-2.00 pct and said it sees two more rate hikes this year for total of four, sees three hikes in 2019, drops reference from previous statements that it expected rates to be below neutral rate for 'some time'.  
  
Fed's Powell said 'U.S. economy is doing very well; intends to hold press conference after every meeting from Jan 2019; fiscal policy is boosting the economy; FOMC expects the jobs market to remain strong; recent rise in oil prices will likely push inflation above 2% over next few months but will be transitory; expects to make further gradual increases in interest rates; over next year or so, interest rates will move close to neutral level.'  
  
Versus the Japanese yen, although dollar traded with a firm bias in Asia and rose to a fresh 3-week peak at 110.72 in European morning, price erased intra-day gains and fell to 110.33 in New York on renewed usd's weakness. However, dollar then rallied to 110.85 in New York on the back of a rate hike from the Federal Reserve but soon fell on broad-based profit taking to 110.27.  
  
Although the single currency traded narrowly in Asia and briefly dipped to 1.1730 at European open, euro found renewed buying and rallied to 1.1770, then ratcheted higher to 1.1793 in New York as investors were optimistic that ECB will signal to reduce QE later this year. Later, despite a brief but sharp fall to an intra-day low at 1.1726 on Fed's rate hike, price swiftly pared its losses and rallied to an intra-day high at 1.1801 in New York afternoon.  
  
The British pound went through a roller-coaster ride. Although cable remained under pressure in Asia and fell to a 1-week low of 1.3309 in European morning on concern over Brexit negotiations and soft UK inflation data suggesting lower chance that Bank of England will hike rate in August. However, price erased intra-day gains and rallied in tandem with euro to 1.3390 in New York. Despite a sharp retreat to 1.3320 in after Fed's rate hike, price rebounded to 1.3383.  
  
UK consumer price inflation held at an annual rate of 2.4 percent in May, its joint-lowest since March 2017, the Office for National Statistics said on Wednesday, below economists' forecasts in a Reuters poll of a small rise to 2.5 percent.   
  
In other news, Reuters reported British Prime Minister Theresa May told lawmakers on Wednesday the government was discussing concerns over parliament's role in Brexit and would come up with a new amendment to satisfy them.   
  
On the data front, the U.S. Labor Department said its producer price index increased 0.5% last month. In the 12 months through May, the PPI rose 3.1%. Economists had forecast the PPI rising 0.3% last month and increasing 2.8% from a year ago. The so-called core PPI increased by 0.3% from a month earlier and rose 2.4% in the 12 months through May. Analysts had predicted core PPI to increase 0.2% month-on-month and 2.3% on an annualized basis.  
  
Data to be released on Thursday :  
  
U.K. RICS housing price; Australia employment change, unemployment rate, China industrial output, retail sales, Japan industrial production, capacity utilization, Germany CPI final, HICP final, France CPI, U.K. RICS housing price balance, retail sales, core retail sales, EU ECB interest rate decision, ECB deposit rate decision, U.S. import prices, export prices, initial jobless claims, retail sales ex-autos, retail sales, business inventories, and Canada new housing price index.