The greenback traded mixed against its peers on Friday as investors booked profits ahead of month end from usd's recent rise and on caution ahead of next week's FOMC rate decision.
Reuters reported U.S. business activity grew at a moderate pace for a second straight month in July amid supply constraints, suggesting a cooling in economic activity after what was expected to have been a robust second quarter. The IHS Markit survey's flash services sector PMI fell to a reading of 59.8 from 64.6 in June, slowing further from May's record high. Economists polled by Reuters had forecast a reading of 64.8 this month for the services sector, which accounts for more than two-thirds of U.S. economic activity.
Versus the Japanese yen, dollar traded with a firm bias in thin Asian trading as Japanese markets were closed and gained to 110.30 in Asia. Intra-day ascent accelerated in European morning and price rose to session highs at 110.59 in New York morning due partly to rise in U.S. Treasury yields and then traded sideways.
The single currency remained under pressure in Asia after Thursday's selloff on ECB's dovish hold and retreated to 1.1764 at European open. The pair then met renewed selling at 1.1787 in European morning and fell to session lows at 1.1755 ahead of New York open before recovering to 1.1780. However, the pair then retreated again to 1.1755 before staging a short-covering rebound to 1.1776 near the close.
Reuters reported European Central Bank policymakers Pierre Wunsch said on Friday he was uncomfortable with the ECB's new guidance, which has been taken as a commitment not to raise interest rates for five or six years. "My dissent shouldn't be dramatised," Wunsch, the Belgian central bank governor, said in a televised interview with CNBC. "I guess it boils down to the kind of commitment you can take over a possibly long period of time - we're maybe talking 5 or 6 years, if we look at market expectations."
The British pound snapped its recent winning streak and met selling at 1.3780 at Asian open and fell to 1.3725 in European morning on release of soft UK PMIs and cross-selling in sterling. Despite edging marginally lower to intra-day low at 1.3720 ahead of New York open, price rebounded strongly to 1.3773 in New York morning before moving narrowly.
News from Reuters, Britain's rapid economic bounce-back from the coronavirus pandemic slowed sharply in July as a new wave of cases forced hundreds of thousands of workers to self-isolate under government rules to limit the spread of the disease. The IHS Markit/CIPS flash composite PMI dropped to 57.7 in July from 62.2 in June, its lowest since March and a sharper fall than most economists had forecast in a Reuters poll.
In other news, Reuters said that the European Central Bank member Francois Villeroy de Galhau said on Friday it was totally justified to keep an accommodative monetary policy for now. Villeroy, who is also the governor of the Bank of France, also told BFM Business radio that the ECB sees the mid-point of its forecast horizon for a 2% inflation target coming in around 12-18 months in the euro zone. The European Central Bank pledged on Thursday to keep interest rates at record lows for even longer to boost sluggish inflation and warned that the rapidly spreading Delta variant of the coronavirus poses a risk to the euro zone's recovery. The central bank of the 19 countries that share the euro said it would not hike borrowing costs until it sees inflation reach its 2% target "well ahead of the end of its projection horizon and durably" -- a controversial decision that generated significant dissent.
Data to be released this week :
New Zealand imports, trade balance, exports, Japan Jibun bank manufacturing PMI, Germany import prices, Ifo business climate, Ifo current conditions, Ifo expectations, U.S. building permits, new home sales and Dallas Fed manufacturing business index on Monday.
Italy trade balance, U.S. durables goods, durables ex-transport, durables ex-defense, redbook, monthly home price, consumer confidence and Richmond Fed manufacturing on Tuesday.
U.K. BRC shop price index, Australia CPI, Japan coincident index, leading indicator, Germany Gfk consumer sentiment, France consumer confidence, Italy business confidence, consumer confidence, Swiss investor sentiment, U.S. MBA mortgage application good trade balance, wholesale inventories, FOMC interest rate decision and Canada CPI on Wednesday.
New Zealand NBNA business outlook, NBNZ outlook activity, Australia export prices, import prices, U.K. nationwide house price, France producer prices Germany unemployment change, Italy producer prices, EU business climate, economic sentiment, industrial sentiment, services sentiment, consumer confidence, Germany CPI, HICP, U.S. GDP, PCE prices, initial jobless claims, continuing jobless claims, pending house sales and Canada average weekly earnings on Thursday.
Japan unemployment rate, industrial output, retail sales, construction orders, housing starts, consumer confidence, Australia PPI, France PPI, Germany GDP, import prices, Swiss retail sales, KOF indicators, France CPI, Italy unemployment rate, GDP, CPI, EU HICP, GDP, unemployment rate, U.S. personal income, personal spending, PCE price index, employment wages, employment costs, Chicago PMI, University of Michigan sentiment, Canada GDP, producer prices and budget balance on Friday.
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