Dollar falls broadly on long liquidation after soft U.S. data and lingering U.S.-China trade tension

Market Review - 25/05/2019  09:44GMT  

Dollar falls broadly on long liquidation after soft U.S. data and lingering U.S.-China trade tension

The greenback ended lower across the board on Friday an continued U.S.-China trade concern together with recent weak U.S. data which suggests a slow down in U.S. economy prompted more long liquidation as investors were worried the Federal Reserve may cut interest rate sooner than expected. Sterling ended its 2-week losing streak after embattling U.K. PM Teresa May announced her resignation date on June 7th.  
  
On the data front, Reuters reported new orders for U.S.-made capital goods fell more than expected in April, further evidence that manufacturing and the broader economy were slowing after a growth spurt in the first quarter that was driven by exports and a buildup of inventories.   
The Commerce Department on Friday said orders for non-defense capital goods excluding aircraft, a closely watched proxy for business spending plans, dropped 0.9% last month as demand weakened almost across the board. Data for March was revised down to show these so-called core capital goods orders rising 0.3% instead of increasing 1.0% as previously reported.     
Economists polled by Reuters had forecast core capital goods orders falling 0.3% in April. Core capital goods orders increased 2.6% on a year-on-year basis.   
  
Versus the Japanese yen, dollar initially recovered to 109.75 in Asian morning and then fell to 109.46 in European morning. Despite rebounding to 109.72, renewed selling emerged and knocked price down to a fresh 1-week low of 109.28 in New York on borad-based usd's weakness.  
Although the single currency traded narrowly but with a firm bias in Asia, euro jumped to 1.1205 at European open on usd's weakness. Despite retreating to 1.1179, price rallied to a 1-week high at 1.1212 in New York on downbeat U.S. data.  
  
The British pound went through a roller-coaster ride. Cable initially moved sideways in Asia and gained in tandem with euro to 1.2687 at European open, price briefly jumped to 1.2709 after U.K. PM May announced she will step down on June 7th before retreating to 1.2659. Although price then rallied to 1.2719 (Reuters), the pair erased its gains and dropped to session lows of 1.2647 at New York open on lingering Brexit concern. The pound later resumed intra-day gain after weak U.S. data and climbed to a high of 1.2734 in early New York afternoon.  
U.K. Prime Minister Theresa May said on Friday she would step down on June 7, succumbing to calls in her governing Conservative Party to make way for a new leader to try to break an impasse over Britain's departure from the European Union.   
  
In other news, Reuters reported the European Union's position on the terms of Britain's exit from the bloc has not changed despite British Prime Minister Theresa May announcing her June 7 resignation earlier on Friday, Commission spokeswoman Mina Andreeva said.   
She reiterated the bloc would not change the stalled Brexit withdrawal deal but could tweak the accompanying political declaration on EU-UK ties after Brexit.   
  
Data to be released this week :  
  
Japan coincident index, leading economic index, Swiss non-farm payrolls, UK market holiday, and U.S. market holiday on Monday.  
  
Swiss GDP, trade balance, exports, imports, Germany GfK consumer sentiment, import prices, France consumer confidence, Italy trade balance, UK BBA mortgage approvals, EU business climate, economic sentiment, industrial sentiment, services sentiment, consumer confidence, and U.S. monthly home price, CS home price, consumer confidence, Dallas Fed manufacturing business index on Tuesday.  
  
New Zealand NBNZ business outlook, NBNZ own activity, Germany import prices, unemployment change, unemployment rate, France consumer spending, GDP, CPI, producer prices, Swiss KOF indicator, investor sentiment, Italy business confidence, U.S. redbook, Richmond Fed manufacturing index, Fed's beige book, and Canada Bank of Canada interest rate decision on Wednesday.  
  
New Zealand building permits, Australia capital expenditure, building capex, Swiss market holiday, UK nationwide house price, U.S. GDP, PCE, trade balance, wholesale inventories, initial jobless claims, pending home sales, and Canada current account, average weekly earnings on Thursday.  
  
UK GfK consumer confidence, Japan CPI, unemployment rate, industrial output, retail sales, consumer confidence, construction orders, China NBS non-manufacturing PMI, NBS manufacturing PMI, Germany retail sales, CPI, HICP, Swiss retail sales, Italy GDP, CPI, producer prices, U.S. personal income, personal spending, PCE, Chicago PMI, University of Michigan sentiment, and Canada GDP, producer price, budget balance on Friday.