Market Review - 02/12/2019  23:47GMT  

Dollar falls broadly on weak U.S. data

The greenback gave up early gains made in Asia and Europe and dropped across the board in New York on Monday due to downbeat U.S. construction spending and ISM manufacturing PMI data together with falling U.S. Treasury yields and stocks.  
Reuters reported U.S. construction spending unexpectedly fell in October as investment in private projects tumbled to its lowest level in three years, offering a cautionary note on the economy despite a recent string of upbeat reports.   The Commerce Department said on Monday construction spending dropped 0.8%. Data for September was revised to show construction outlays declining 0.3% instead of rising 0.5% as previously reported.   Economists polled by Reuters had forecast construction spending gaining 0.4% in October. Construction spending increased 1.1% on a year-on-year basis in October.   
Reuters reported the U.S. economy's manufacturing sector contracted for a fourth straight month in November as new order volumes slid back to around their lowest level since 2012, according to an industry report released on Monday.  The Institute for Supply Management (ISM) said its index of national factory activity fell to 48.1 from 48.3 the month before. The reading was below expectations of 49.2 from a Reuters poll of 57 economists.  A reading above 50 indicates expansion in the manufacturing sector and a reading below 50 indicates contraction.  
Versus the Japanese yen, although dollar traded with a firm bias in Asia and gained to a near 6-month high at 109.72 on upbeat China manufacturing PMI data, price retreated to 109.57 at European open before rebounding to 109.70. However, renewed selling emerged and the pair tumbled in New York due to weak U.S. data together with falling U.S. Treasury yields and equities and hit session lows at 108.93 in New York afternoon.  
Reuters reported China's factory activity unexpectedly expanded at the quickest pace in almost three years in November, with solid increases in output and new orders, a private business survey showed on Monday.   But business confidence slipped and companies were reluctant to replenish their inventories, worried about the uncertain outlook for demand and the prolonged China-U.S. trade war.   The Caixin/Markit Manufacturing Purchasing Managers' Index (PMI) index rose to 51.8 in November from 51.7 in the previous month. That marked the fastest expansion since December 2016, when it was 51.9.   
The single currency initially gained to 1.1027 in New Zealand and despite retreating to 1.1004 in Europe, the pair found renewed buying and then rallied to a 10-day high of 1.1089 in New York on usd's weakness as well as cross-buying of euro especially vs sterling before easing.  
Reuters reported Germany's export-dependent manufacturing sector contracted at a slower pace for the second month in a row in November, a survey showed on Monday, as companies sounded optimistic about their future business.   IHS Markit's Purchasing Managers' Index (PMI) for manufacturing, which accounts for about a fifth of the economy, rose slightly for the second consecutive month to a five-month high reading of 44.1.     
Reuters reported euro zone manufacturing activity contracted for a 10th straight month in November although the bloc's battered factories may have turned a corner as forward-looking indicators in Monday's survey appear to have passed a nadir.   IHS Markit's final manufacturing Purchasing Managers' Index (PMI) has been below the 50 mark separating growth from contraction since February, but at 46.9 it was above October's 45.9 and higher than a preliminary estimate of 46.6.   
The British pound went through a roller-coaster session. Although cable opened lower and fell to 1.2906 in New Zealand as a poll released over the weekend showed PM Johnson's lead shrinking, price rebounded to 1.2927 at European open on short-covering before ratcheting lower to session lows of 1.2897 on cross-selling in sterling. However, the pair then erased its losses and rose to an intra-day high at 1.2949 near New York closing on usd's weakness.  
Reuters reported the lead for British Prime Minister Boris Johnson's Conservatives over the Labour Party has narrowed sharply to six points from 13 a week ago, according to a poll by BMG for the Independent newspaper conducted before the London Bridge attack.   The Conservatives were on 39%, down 2 points, compared with the last BMG poll published on Nov. 23.   Labour rose five points to 33%. The Liberal Democrats fell five points to 13% and the Brexit Party gained one point to 4%.   The poll was the latest of several surveys by various polling firms to show a tightening of the race in recent days.    
BMG polled 1,630 British voters online between Nov. 27 and 29. Polling was completed before an attack on Friday by a man carrying knives who killed two people before being shot dead by police on London Bridge.   
Reuters reported British manufacturers cut jobs last month at the fastest rate since 2012, a survey showed on Monday, as pressures from Brexit and a global trade slowdown caused the sector's longest decline since the financial crisis.   The IHS Markit/CIPS manufacturing Purchasing Managers' Index (PMI) sank to 48.9 in November from 49.6 in October, a slightly smaller decline than an initial flash estimate of 48.3.   But the PMI stuck below the 50 level that divides growth from contraction for a seventh consecutive month, the longest such run since 2009, as the country headed for an early election on Dec. 12 intended to end a parliamentary logjam over Brexit.   
In other news, Reuters reported economic growth in the euro zone is weak but consumption has remained resilient and the European Central Bank's easy policy continues to lend support, new ECB President Christine Lagarde said on Monday.   "Euro area growth remains weak," Lagarde told the European Parliament in her first hearing since taking the ECB's helm a month ago.   "Yet, consumption has held up fairly well: labour market conditions have continued to improve, encouraging consumers to remain confident and to continue to spend."   
Data to be released on Tuesday :  
UK BRC retail sales, Markit construction PMI, Australia current account, RBA interest rate decision, Swiss CPI, France budget balance, EU producer prices, New Zealand GDT price index, and U.S. redbook, ISM New York index. 

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