Dollar falls on soft U.S. CPI data, euro jumped as ECB stays on course to reduce QE later this year

Market Review - 13/09/2018  23:50GMT  

Dollar falls on soft U.S. CPI data, euro jumped as ECB stays on course to reduce QE later this year

The greenback continued its recent losing streak and fell to a fresh 5-week low in New York morning on Thursday after soft U.S. consumer prices suggest economy is growing at a slower pace than what market has anticipated as well as easing U.S./China trade tension. The single currency jumped to a near 2-week high of 1.1701 in New York morning after ECB said they will reduce its bond purchases later this year while sterling rallied to a fresh 5-week peak of 1.3124 on Brexit optimism.  
  
The U.S. Labor Department said on Thursday its consumer price index advanced 0.2%, missing expectations for a gain of 0.3%. The CPI rose 0.2% in July. In the 12 months through July, the CPI increased 2.7%, below forecasts for a reading of 2.8% and down from 2.9% in July.  
  
Versus the Japanese yen, dollar initially dipped to 111.17 at Asian open then jumped to 111.45 in Asian morning due to gains in Asian equities on prospect of renewed U.S./China trade talks. The greenback later ratcheted higher to 111.65 at New York open and despite a brief but sharp fall to 111.38 on weak U.S. CPI data, the pair found renewed buying and rallied to session highs at 111.99 on easing easing U.S./China trade tension together with cross-selling in yen before easing.  
  
The single currency went through a hectic trading session. Euro ratcheted lower to 1.1609 in Europe y'day due to weakness in Turkish lira, however, intra-day rally in TRY after Turkish cenbank's massive 6.25% rate hike sent price rallying at ECB Drgahi's presser and euro later hit a near 2-week peak of 1.1701 due to soft U.S. CPI data and as ECB signaled it was on track to reduce its bond purchase later this year after leaving interest rate unchanged. Euro briefly retreated to 1.1669 before inching higher near the close.  
  
Reuters reported Italian Economy Minister Giovanni Tria did not offer his resignation due to tensions over next year's budget, and in particular with the 5-Star Movement's promised universal income, an economy ministry source said on Thursday.   
  
Reuters reported at today's meeting the Governing Council of the European Central Bank (ECB) decided that the interest rate on the main refinancing operations and the interest rates on the marginal lending facility and the deposit facility will remain unchanged at 0.00%, 0.25% and -0.40% respectively.   
  
After September 2018, the Governing Council will reduce the monthly pace of the net asset purchases to 15 billion euro until the end of December 2018 and anticipates that, subject to incoming data confirming the medium-term inflation outlook, net purchases will then end.   
  
Reuters reported Turkey's central bank raised its benchmark rate by 625 basis points on Thursday in a move that boosted the lira and may ease investor concern about President Tayyip Erdogan's influence on monetary policy.   
  
The British pound also went through a volatile session. Cabled moved sideways in Asia and fell in tandem with euro to 1.3026 at European open before rising to 1.3073. Despite a brief but sharp drop to 1.3034 after Bank of England left interest rate unchanged and said that market is concerned about Brexit, price spiked up to 1.3091 at New York open on weak U.S. CPI data and rising Turkish lira, then ratcheted higher to a fresh 5-week high at 1.3124 after media reported that Britain and EU have made progress on key Brexit issue before a minor pullback on profit taking.  
  
Reuters reported the Bank of England kept interest rates on hold on Thursday and highlighted greater financial market concerns about Brexit, a month after raising rates for only the second time in more than a decade.   
  
The BoE said its nine rate-setters voted unanimously to hold rates at 0.75 percent, in line with economists' expectations in a Reuters poll, and said there had been limited domestic developments since its Aug. 2 meeting, other than on Brexit.  
  
In other news, Reuters reported Britain will pay "substantially" less to the European Union than the roughly 39 billion pounds withdrawal bill agreed with the bloc if there is no final agreement, Brexit minister Dominic Raab said on Thursday.   
  
Raab said it may take time to work out how much Britain would need to pay if London and Brussels failed to reach agreement on Britain's exit from the EU.   
  
On the data front, the number of individuals in U.S. filing for initial jobless benefits in the week ended Sept. 7 decreased by 1,000 to 204,000, down from the previous week's total of 205,000, the U.S. Department of Labor said. The prior reading was revised up from 203,000. Analysts had expected claims to rise to 210,000 last week.  
  
Data to be released on Friday :  
  
New Zealand manufacturing PMI, China industrial output, retail sales, Japan industrial output, capacity utilization, Italy CPI, EU trade balance, labour costs, and U.S. import prices, export prices, retail sales, industrial production, capacity utilization, manufacturing output, business inventories, University of Michigan sentiment.