The greenback snapped its recent winning streak and fell sharply in New York on Tuesday due to profit-taking and as U.S. yields retreated whilst sterling rose across the board on dampened expectation that the Bank of England may cut interest rates to 0% after Governor Andrew Bailey said there were a lot of issues with negative rates.
Versus the Japanese yen, dollar moved broadly sideways as focus was on other major currencies. The pair rebounded from 104.11 at Asian open to 104.32, then 104.33 in New York morning before falling to an intra-day low at 103.73 near New York close on usd's broad-based weakness.
Although the single currency retreated to 1.2139 in Asia, price gained in tandem with cable to 1.2178 in Europe on usd's weakness before falling to 1.2138 in New York morning on cross-selling in euro, especially versus sterling. The pair erased its intra-day losses and rallied to 1.2209 near New York close.
Although the British pound dipped to 1.3505 in Asian morning, price found renewed buying and rose to 1.3567 at European open and then jumped to 1.3607 after Bank of England Governor Andrew Bailey downplayed negative rate expectations. Cable then rallied to session highs of 1.3670 in late New York afternoon due partly to usd's broad-based weakness together with cross-buying of sterling especially vs euro.
Reuters reported Bank of England Governor Andrew Bailey said on Tuesday there were "lots of issues" with cutting interest rates below zero and such a move could hurt banks. "In simple economics and maths terms, there is nothing to stop it at all," Bailey said when asked about negative rates after an online speech to the Scottish Chambers of Commerce. "However there are a lot of issues with it." Bailey said negative rates - the subject of a feasibility review by the BoE - would complicate banks' efforts to earn a rate of return, potentially hurting their lending to companies, and that it was not easy to draw a direct parallel with similar action in the euro zone.
Data to be released on Wednesday :
Japan machine tool orders, Germany wholesale price index, Italy industrial output, EU industrial production, Canada leading index, and U.S. MBA mortgage applications, core CPI, CPI, real weekly earnings, Federal budget.
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