Dollar falls after soft U.S. data, sterling regains traction on renewed Brexit optimism

Market Review - 16/03/2019  01:35GMT  

Dollar falls after soft U.S. data, sterling regains traction on renewed Brexit optimism

The greenback continued this week's losing streak ended broadly lower against majority of its peers on Friday as investors sold the dollar due to soft U.S. data which further suggests Federal Reserve will leave interest rates unchanged for a longer period of time. Sterling rallied in New York on renewed Brexit optimism and the single currency gained to a 9-day high on usd's weakness.  
  
Reuters reported the Fed said manufacturing production dropped 0.4 percent last month, held down by declines in the output of motor vehicles, machinery and furniture. Data for January was revised up to show output at factories falling 0.5 percent instead of slumping 0.9 percent as previously reported.  
  
Economists polled by Reuters had forecast manufacturing output rising 0.3 percent in February.  
U.S. industrial production inched up 0.1% last month after declining 0.4% in January, according to Federal Reserve data released Friday. Economists had forecast an increase of 0.4%.  
  
Versus the Japanese yen, although price initially gained to 111.90 in Asian morning, price fell to 111.49 on active safe-haven jpy buying after media reported that North Korea was considering to halt further nuclear talks with United States before rebounding to 111.76 in Europe. However, the pair then tumbled to session lows at 111.39 in New York on sharp fall in U.S. Treasury yields.  
  
The single currency went through a volatile session. Although price traded with a firm bias in Asia and rose to 1.1327, then ratcheted higher to 1.1329 in European morning on cross-buying in euro and then retreated to 1.1300 in New York morning, renewed buying emerged and pushed price higher to a 9-day high of 1.1345 on usd's weakness before easing on profit taking.  
  
The British pound went through a roller-coaster ride. Cable traded broadly sideways in Asia and then staged a brief but sharp fall to 1.3203 at European open before rallying to 1.3278 in Europe. Despite retreating again to 1.3230 in New York morning, the pair later rose to session highs at 1.3300 on news that UK Finance Minister Philip Hammond was meeting with Norther Irish Democratic Unionist Party.  
In other news, Reuters reported Britain's Attorney General will work over the weekend with the Northern Irish party that props up Theresa May's government on a possible agreement to break the Brexit impasse, Sky News reported on Friday.   
Sky's deputy political editor said the two sides were looking at what additional provisions could be added to domestic law to "underline interpretations on (the) backstop", the key part of the EU divorce deal that the Democratic Unionist Party (DUP) has objected to.   
  
Reuters reported Britain would only be granted an extension to the article 50 Brexit negotiation period if its parliament passed the current deal on the table or if a clear, alternative plan emerged by next week's EU summit, a French official said on Friday.   
On the data front, Reuters reported euro zone inflation edged higher as expected in February, the European Union's statistics office confirmed on Friday, mainly because of more expensive services, food, alcohol an tobacco.   
Eurostat confirmed its earlier estimates that consumer prices in the 19 countries sharing the euro rose 0.3 percent month-on-month for a 1.5 percent year-on-year gain, accelerating from 1.4 percent year-on-year in January.   
  
Data to be released this week :  
  
Japan exports, imports, trade balance, industrial production, capacity utilization, UK Rightmove house price, EU trade balance, and U.S. NAHB housing market index on Monday.  
  
New Zealand Westpac consumer survey, GDT price index, Australia home price index, Swiss trade balance, exports, imports, Italy trade balance, UK claimant count, ILO unenmployment rate, employment change, average weekly earnings, Germany ZEW economic sentiment, ZEW current conditions, EU construction output, labour costs, ZEW economic sentiment, and U.S. redbook, durables ex-defense, durable goods, durables ex-transport, factory orders on Tuesday.  
  
New Zealand current account, Australia Westpac leading index, Japan coincident index, leading economic index, Germany producer prices, UK CPI, RPI, PPI input prices, PPI output prices, DCLG house price index, CBI trens survey, and U.S. MBA mortgage application, Fed interest rate decision on Wednesday.  
  
New Zealand GDP, Japan market holiday, Australia employment change, unemployment rate, Swiss interest rate decision, UK retail sales, BoE MPC vote hike, BoE MPC vote unchanged, BoE MPC vote cut, BoE interest ratre decision, BoE QE total, BoE QE corporate bond purchases, Canada ADP employment change, U.S. initial jobless cliams, Philadelphia Fed survey, leading indicator, and EU consumer confidence on Thursday.  
  
Australia manufacturing PMI, services PMI, Japan CPI, Nikkei manufacturing PMI, France Markit manufacturing PMI, Markit services PMI, Germany Markit manufacturing PMI, Markit services PMI, EU current account, Markit manufacturing PMI, Markit services PMI, UK PSNB, PSNCR, Canada CPI, retail sales, U.S. Markit manufacturing PMI, Markit services PMI, existing home sales, wholesale inventories, wholesale sales, Federal budget on Friday.