Market Review - 23/05/2019 00:08GMT
Dollar ends mixed after Fed minutes shows 'patiient' pause, sterling pummels on UK political turmoil
The greenback ended mixed on Wednesday as attention shifted to development of U.S.-China trade talks while sterling tumbled to a 4-1/2 month low as UK PM May's Brexit deal failed to gain support and ministers were forcing for her resignation.
Late in the day, May's minutes of FOMC meeting showed officials agree that their current patient approach to setting monetary policy could remain in place "for some time."
Policymakers saw little need to change rates in either direction. A rate hike in 2019 is unlikely, even as the U.S. economy continues to grow and inflation remains muted, the minutes showed.
Versus the Japanese yen, although dollar initially gained to 110.63 in Asian morning, price erased its gains and fell to 110.37 in European morning and then ratcheted lower to session lows at 110.25 in New York on active safe-have jpy buying as investors turned focused to U.S.-China trade concern together with falling U.S. Treasury yields.
The single currency went through a roller-coaster ride. Although price fell from 1.1169 (Reuters) in Australia to session lows at 1.1148 in European morning, price found renewed buying and later rallied to 1.1180 at New York open on cross-buying in euro, especially versus sterling before retreating. Price lates traded at 1.1152 near the close.
Although the British pound recovered to 1.2719 in Asian morning after Tuesday's wild swings, renewed selling emerged and intra-day fall accelerated at European open and dropped to 1.2642 ahead of New York open on political uncertainty after UK PM May's revised Brexit deal was turned down by lawmakers and she may be forced to step down sooner than expected together with weaker-than-expected UK CPI data. Later, the pair fell to a 4-1/2 month low at 1.2624 in New York before rebounding to 1.2693 aon short covering.
Earlier, Reuters reported British inflation rose last month by less than investors and the Bank of England had expected but still hit its highest level this year, pushed up by a rise in energy bills.
Consumer prices rose at an annual rate of 2.1% in April after a 1.9% increase in March, the Office for National Statistics said on Wednesday. A Reuters poll of economists had pointed to a rate of 2.2%, the same as the BoE's forecast.
Reuters reported citing source from The Times' Same Coates that Nigel Evans is planning to push to change rules so another "no confidence" vote can happen immediately. Also, there are rumours Prime Minister Theresa May's top team of ministers will move against her on Wednesday, an ITV reporter said on Twitter, citing an unnamed source.
"Rumours - not yet confirmed, but equally not being denied - of a move against PM by cabinet today. Source says 'it's looking likely,'" ITV Political Correspondent Paul Brand said.
In other news, Reuters then reported U.S. interest rates are in the right place given a strong economy and "essentially nonexistent" inflation pressures, a top Federal Reserve policymaker said on Wednesday.
New York Fed President John Williams said at a press briefing that some risks to global growth have receded and domestic drivers of the U.S. economy are strong, likely putting growth above 2% and its long-run potential this year.
Rates, meanwhile, of currently between 2.25-2.50% are right about at a "neutral" level that neither eases the economy nor restricts it, and he sees limited argument for changing those borrowing costs.
Data to be released on Thursday :
Australia manufacturing PMI, services PMI, Japan Nikkei manufacturing PMI, France business climate, Markit manufacturing PMI, Markit services PMI, Germany GDP, Markit manufacturing PMI, Markit services PMI, Ifo business climate, Ifo current conditions, Ifo expectations, Swiss industrial production, EU Markit manufacturing PMI, Markit services PMI, Canada wholesale trade, and U.S. building permits, initial jobless claims, Markit manufacturing PMI, Markit services PMI, new home sales, KC Fed manufacturing index.
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