Dollar ends lower on falling US yields and stocks

Market Review - 02/10/2019  23:57GMT  

Dollar ends lower on falling US yields and stocks

The greenback ended the day lower against majority of its peers on Wednesday as a selloff in U.S. Treasury yields and stocks continued to raise concerns about the country's economy and fueled speculation that the Federal Reserve may cut rates in light of recent soft data.  
  
Versus the Japanese yen, although the dollar rose to session highs at 107.89 in Asian morning, price erased its gains and dropped to 107.56 in early European morning, then lower to an intra-day low at 107.06 in New York on falling U.S. yields and stocks before recovering.  
  
The single currency briefly gained to 1.0941 at Asian open before falling to an intra-day low at 1.0905 in European morning. However, euro erased its losses and later rallied to session highs at 1.0963 in New York on usd's broad-based weakness before stabilising.  
  
The British pound met renewed selling at 1.2300 at Asian open and dropped to an intra-day low at 1.2227 in European morning due partly to the release of soft UK construction data. However, cable then erased its losses and rallied to session highs at 1.2324 in New York on usd's weakness together with Brexit optimism after UK PM Johnson gave details of his proposal.  
  
Reuters reported a downturn in British construction deepened last month, according to a survey on Wednesday that showed the commercial and civil engineering sectors contracting at the fastest in around 10 years ahead of Brexit.  The IHS Markit/CIPS UK Construction Purchasing Managers' Index fell to 43.3 from 45.0 in August, below all forecasts in a Reuters poll of 17 economists that had pointed to an unchanged reading.  Far below the 50 dividing line for growth, September's reading was the second-worst since the financial crisis. Construction firms cut jobs at the fastest rate since December 2010, data company IHS Markit said.  
  
Britain issued its proposals on Wednesday for how to deal with the Irish border after Brexit, removing the so-called backstop but with measures it said would avoid the need for checks or physical infrastructure.  The document said the proposals would provide for the potential creation of an all-island regulatory zone on the island of Ireland covering all goods, would ensure the integrity of the European Union Single Market and would be in keeping with the 1998 Good Friday peace deal.  "It is, as such, a proposal for an agreement which should be acceptable to both sides," it concluded.  
  
In other news, Reuters said PM Boris Johnson on Wednesday made a Brexit offer to the European Union but said that if Brussels does not engage then Britain would leave on Oct. 31 without a deal.    In his closing speech to his Conservatives' annual conference, Johnson stuck to his hard line on Brexit, giving the party faithful some of the first details of what he described as his "fair and reasonable compromise" to the EU.    
In a strategy that will define the future of Brexit, the EU and his premiership, Johnson is betting he can get enough concessions from Brussels to persuade Brexit supporters in the British parliament to ratify any deal.  "We are coming out of the EU on October 31, come what may," Johnson told party members, after expressing "love" for Europe in a speech which focused mostly on domestic issues such as health, the economy and crime.  "We are tabling what I believe are constructive and reasonable proposals which provide a compromise for both sides," Johnson said. "Let us be in no doubt that the alternative is no deal."    
With less than a month left until Britain is due to leave the EU, the future of Brexit, its most significant geopolitical move since World War Two, is uncertain. It could leave with a deal or without one - or not leave at all.  
  
On the data front, Reuters reported U.S. private employers hired fewer workers than expected in September and payroll gains in the prior month were revised lower, pointing to a slowdown in the labor market.    
The ADP National Employment Report on Wednesday showed private employers added 135,000 jobs in September. Economists polled by Reuters had forecast private employment to rise by 140,000 jobs in September. Data for August was revised downward to show private payrolls increasing by 157,000 jobs instead of the previously reported 195,000 positions.  Economists polled by Reuters are expecting nonfarm payrolls to have increased by 145,000 jobs in September, after rising 130,000 in August. Job gains have averaged 158,000 per month this year, above the roughly 100,000 needed each month to keep up with growth in the working age population.  
  
Data to be released on Thursday:  
  
Australia AIG services index, trade balance, imports, exports, China market holiday, Italy Markit services PMI, France Markit services PMI, Germany Markit services PMI, U.K. Markit services PMI, EU Markit services PMI, producer prices, retail sales and U.S. Markit services PMI, initial jobless claims, durables goods, durable ex-def, factory orders, durable ex-transport, non-manufacturing PMI.