Dollar falls on trade war fear, market awaits Germany's coalition ballot result and Italian election

Market Review - 04/03/2018  06:35GMT  

Dollar falls on trade war fear, market awaits Germany's coalition ballot result and Italian election

The greenback continued to slide against majority of its peers on Friday after U.S. President Trump's announcement on Thursday to impose U.S. tariffs on steel and aluminum imports and tweeted today by saying "trade wars are good, and easy to win". Market's next attention is on Saturday's ballot by the German SPD on forming a grand coalition with the ruling German Chancellor Merkel's CDU party and Sunday's referendum in Italy which is likely to result in a hung parliament.  
  
U.S. President Donald Trump tweeted on Friday, a day after announcing steep tariffs on imports of steel and aluminum, that "trade wars are good, and easy to win".  
  
Versus the Japanese yen, dollar remained under pressure and fell to 105.72 ahead of European open on Bank of Japan Kuroda's comments on policy exit. Price then ratcheted lower to a fresh 15-month low of 105.25 ahead of New York open before rebounding to 105.75 at New York close as rebound in U.S. Treasury yields and the Dow triggered short-covering ahead of the weekend holiday.  
  
Reuters reported Bank of Japan Governor Haruhiko Kuroda said on Friday the Central Bank was ready to debate an exit strategy from ultra-easy monetary policy and communicate its plans to markets when the appropriate time to do so comes.  
  
The single currency initially extended Thurday's impressive rally to 1.2288 in Asia before retreating in tandem with sterling to intra-day low of 1.2252 at European open. However, euro erased intra-day losses and later rallied to session highs of 1.2336 near New York close on broad-based usd's weakness.  
  
The British pound initially edged up to 1.3794 in Asian morning before retreating to 1.3756 in European morning. Despite subsequent rally to session highs of 1.3817, cable then retreated to 1.3757 in New York after U.K. Prime Minister May's Brexit speech. Price later rebound and last traded at 1.3798 near the close.  
  
Reuters news, UK PM May said; '"no deal" is still better than a bad deal in Brexit talks; there are tensions in EU's position; this is a negotiation, no-one can have exactly what they want, but confident of agreement.'  
  
Reuters reported the German leader of the biggest party in the European Parliament, an ally of Chancellor Angela Merkel, said Friday's speech by Prime Minister Theresa May left him worried there may be no deal on Brexit.   
  
In other news, Reuters reported Europe will retaliate with a firm joint response if the Trump administration goes ahead with plans to impose tariffs on imported steel and aluminum, French finance Minister Bruno Le Maire said on Friday.  
  
On the data front, the University of Michigan's consumer sentiment index was revised up from a preliminary reading of 95.7 to 99.7. That was its second highest level since 2004. Economists had forecast a reading of 99.5.  
  
Data to be released this week:  
  
Australia Market holiday, AIG service index, buidling permits, Japan Markit service PMI, China Caixin service PMI, Italy Markit Service PMI, France Markit Service PMI, Germany Markit Service PMI, EU Markit Service PMI, sentix index, retail sales, U.K. Markit Service PMI, and U.S. Markit Service PMI, ISM non-manufacturing PMI on Monday  
  
Australia retail sales, RBA interest rate decision, RBA rate statement, New Zealand GDT price index, Swiss CPI, U.K. BRC retail sales, U.S. redbook, durables ex-defence, durable goods, factory orders, durables ex-transportation, and Canada Ivey PMI on Tuesday.  
  
Australia AIG manufacturing index, GDP, Japan conincident indicator, leading indicator, France, current account, trade balance, imports, exports, EU GDP, U.S. MBA mortgage application, ADP employment change, goods trade balance, and Canada housing starts, exports, imports, BoC rate decision, rate statement on Wednesday.  
  
New Zealand manufacturing sales, Japan current account, GDP, GDP deflator, Eco watchers current, Eco watchers outlook, Australia trade balance, imports, exports, China exports, imports, trade balance, Swiss unemployment rate, Germany industrial orders, U.K. RICS housing price balance, EU ECB interest rate decision, ECB deposit rate decision, Canada housing start, building permits, and U.S. initial jobless claims on Thursday.  
  
New Zealand retail sales, China PPI, CPI, Japan BoJ interest rate decision, Germany industrial output, current account, exports, imports, France budget balance, industrial output, U.K. construction output, industrial output, manufacturing output, trade balance non-EU, NIESR GDP estimate, EU trade balance, employment, U.S. non-farm payrolls, unemployment rate, average earnings, wholesale inventories, wholesale sales, and Canada employment change, unemployment rate on Friday.