Dollar falls broadly after dovish comments by S. Francisco Fed President Daly

Market Review - 16/02/2019  03:28GMT  

Dollar falls broadly after dovish comments by S. Francisco Fed President Daly

Dollar swung sideways against its peers in New York morning on Friday as concerns over U.S.-China trade talks and Brexit continued to linger, however, the greenback later fell broadly in New York afternoon trading after dovish comments by San Francisco Fed President Mary Daly (2019 non-voting member of FOMC). Rally in U.S. stocks aslo weighed on the usd, the Dow closed up by 443 points or 1.74% at 25883.  
  
Reuters reported the Federal Reserve probably will not need to raise U.S. interest rates this year, given a slowdown in economic growth and muted inflation, San Francisco Fed President Mary Daly told the Wall Street Journal in an interview published on Friday.  
  
"If the economy evolves as I just said I expect it to -- 2 percent growth, 1.9 percent inflation, no sense that (price pressures are) going up, no sense that we have any acceleration -- then I think the case for a rate increase isn't there" this year, Daly said, according to the paper.  
  
Earlier in New York morning, U.S. manufacturing output fell steeply in January as motor vehicle production posted its biggest fall since 2009, with declines in a broad range of goods likely to fuel fears of a sharp slowdown in factory activity.  
  
The Federal Reserve said on Friday manufacturing production slumped 0.9 percent last month, the deepest drop in eight months. Data for December was revised to show a smaller increase in output that month than initially reported.  
  
Versus the Japanese yen, dollar dropped in Asian morning on over night selling and fell to 110.27 due to a drop in the Nikkei, then marginally lower to session lows at 110.26 in early European morning. However, price erased its losses and rallied to an intra-day high at 110.65 at New York open before retreating to 110.39 in New York morning on weak U.S. data and as concerns over U.S. and China trade talks remain. Price last traded at 110.48 near the close.  
  
The single currency remained under pressure in Asia and dropped to 1.1268 in early European morning. Price met renewed selling at 1.1286 and tumbled to a fresh 2-1/2 month low at 1.1234 at New York open on cross-selling of euro especially vs sterling after dovish comments by ECB board member Coeure. However, price pared its losses and later staged a strong rebound to 1.1308 in New York afternoon following Fed Daly's comments.  
  
Rurters reported a new round of long-term loans from the European Central Bank to euro zone lenders is possible and being discussed, ECB board member Benoit Coeure said in New York on Friday.  
  
Coeure added that the euro zone's recent economic slowdown is more pronounced than earlier expected, suggesting that the path of inflation will also be more shallow.  
  
The ECB will next meet on March 7 and policymakers are widely expected to slash growth and inflation projections as the euro zone is suffering its biggest slowdown in half a decade.  
  
The British pound traded sideways in Asia after Thursday's selloff on Brexit concerns and rebounded to 1.2823 at European open, then to 1.2831 in Europe on upbeat UK retail sales data. Despite a brief retreat to 1.2789 at New York open, price later rallied to session highs of 1.2897 ahead of New York close due partly to cross-buying of sterling especially vs euro and yen.  
  
U.K. retail sales rose by 1% in January, as consumers shrugged off uncertainty over the country's plan to leave the European Union at the end of March and took advantage of post-holiday sales.  
  
Retail sales rose 1% in January and were up 4.2% from a year earlier, the Office for National Statistics said on Friday. That was compared to a fall of 0.7% in the previous month, which was revised up from a negative 0.9%. Economists polled by Investing.com had forecast a reading of 0.2% for the month and a rise of 3.4% year on year.  
  
In other news, USD/MAJ - Reuters reported, U.S. President Donald Trump said on Friday he may extend a March 1 deadline for reaching a trade deal with China while keeping current tariffs in place, adding that the negotiations are "very complicated."  
  
"There is a possibility that I will extend the date," Trump told a news conference in the White House Rose Garden. "But if I do that, if I see that we're close to a deal or the deal is going in the right direction, I would do that at the same tariffs that we're charging now, I would not increase the tariffs."  
  
U.S. tariffs on $200 billion worth of Chinese imports are scheduled to rise to 25 percent from the current 10 percent rate if no deal is reached by March 1.  
  
On the data front, U.S. consumer sentiment improved in February, recovering from a near-two-year low measured as the partial government shutdown increased worries about economic growth.   
  
The preliminary publication of the data for February from the University of Michigan's Consumer Survey Center showed that the consumer sentiment index increased to 95.5 from 91.2 a month earlier. Economists had forecast a rise to 93.3.  
  
Data to be released this week:  
  
Japan machinery orders, UK Rightmove house prices, Canada and U.S. market holiday on Monday.  
  
Swiss trade balance, Italy industrial orders, EU current account, construction output, ZEW economic sentiment, UK unemployment rate, claimant count, average earnings, Germany ZEW economic sentiment, ZEW current conditions and U.S. NAHB housing market index on Tuesday.  
  
Japan exports, imports, trade balance, Australia wage price index, produver prices, Germany PPI, Swiss industrial production, UK CBI survey, U.S. mortgage applications, redbook retail sales and FOMC minutes on Wednesday.  
  
Japan manufacturing PMI, Australia unemployment rate, employment change, Germany CPI, HICP, manufacturing PMI, services PMI, France CPI, HICP, manufacturing PMI, services PMI, Germany manufacturing PMI, services PMI, EU manufacturing PMI, services PMI, Italy CPI, HICP, U.S. durable goods, jobless claims, manufacturing PMI, services PMI, existing home sales, leading indicator and Canada wholesale trade on Thursday.  
  
Japan National CPI, Germany FDP, Ifo business climate, Ifo current conditions, Ifo expectations, EU HICP, UK CBI distributive trades and Canada retail sales on Friday.