Dollar falls on tension ahead of U.S.-China trade talk before recovering as U.S. stocks pare earlier losses

 Market Review - 09/05/2019  23:47GMT  

Dollar falls on tension ahead of U.S.-China trade talk before recovering as U.S. stocks pare earlier losses

Although the greenback fell broadly lower against majority of its peers on Thursday in early New York trading as U.S. stocks tumbled on market fear that trade conflict between United States and China may escalate, dollar later pared intra-day losses as the Dow rebounded after falling initially by nearly 500 points and ended the day down 138 points or 0.54% at 25828. Sterling tumbled to an 8-day low on continued deadlock in Brexit talks between UK Conservative government and the Labour Party.  
  
Versus the Japanese yen, dollar remained under pressure and fell to 109.84 at Asian open on U.S. President Trump's comments as well as selloff in Asian equities and then dropped to 109.61 in European morning on remarks from China's Commerce Ministry. Despite recovering to 109.91, renewed selling emerged and knocked price down to a 3-month low at 109.47 in New York on active safe-haven jpy buying caused by U.S.-China trade tension together with falling U.S. stocks and Treasury yields. However, the pair rebounded on short covering to 109.89 as U.S. stocks pared initial losses. Dler last traded at 109.75 at the close.  
  
President Donald Trump said on earlier in Asian morning to a crowd of supporters in Florida that China "broke the deal" in trade talks with Washington and would face stiff tariffs if no agreement is reached.  
  
China is fully prepared to defend its interests in its trade war with the United States, but hopes the United States can resolve problems through dialogue instead of unilateral steps, the Chinese commerce ministry said on Thursday.  
  
Although the single currency moved sideways in Asia and dipped to briefly 1.1174 in European morning, price found renewed buying and intra-day gain accelerated in New York morning and then rallied to a 1-week high at 1.1251 on renewed usd's weakness due to initial weakness in U.S. stocks but later reterated to 1.1210 as the Dow recovered in New York afternoon.  
  
The British pound went through a roller-coaster ride. Although cabled initially recovered to 1.3026 at European open, price met renewed selling and fell to 1.2976, and then ratcheted lower to an 8-day low of 1.2967 in New York morning on continued Brexit concern. However, the pair pared erased intra-day losses and rallied in tandem with euro to session highs of 1.3037 due to short covering before retreating.  
  
Reuters reported, the leader of Britain's opposition Labour Party said Prime Minister Theresa May must move her red lines if there was any chance of a breakthrough on Brexit.  
  
In other news, Reuters reported the Bank of England is unlikely to raise interest rates far or fast, even if the economy picks up following a smooth Brexit, Monetary Policy Committee member Michael Saunders said in an interview published on Thursday.   
  
Business investment would probably pick up following a smooth Brexit but a series of "cliff edge" delays could cause it to continue to stagnate, Saunders told the Northern Echo newspaper during a visit to northeast England.   
  
On the data front, Reuters reported U.S. producer prices rose moderately in April, but underlying inflation pressures at the factory gate appeared to be picking up.   
  
The Labor Department said on Thursday its producer price index for final demand increased 0.2 percent last month after jumping 0.6 percent in March. In the 12 months through April, the PPI increased 2.2 percent, matching March's rise.   
  
Economists polled by Reuters had forecast the PPI gaining 0.2 percent in April and increasing 2.3 percent on a year-on-year basis.  
  
Data to be released on Friday :  
  
New Zealand retail sales, Japan all household spending, trade balance, Germany exports, imports, trade balance, current account, France industrial output, non-farm payrolls, Italy industrial output, retail sales, UK GDP, industrial output, manufacturing output, construction output, trade balance, GDP, NIESR GDP estimate, U.S. CPI, real weekly earnings, Federal budget, and Canada building permits, employment change, unemployment rate.