Dollar falls vs yen on US/China trade concern but gains vs other currencies on selloff in euro

Market Review - 01/09/2019  23:12GMT  

Dollar falls vs yen on US/China trade concern but gains vs other currencies on selloff in euro

The greenback ended higher against its G4 peers on Friday, except for safe-haven Japanese yen as investors braced for the implementation of the retaliatory tariffs of US and China on Sunday together with upbeat U.S. consumer spending data. The single currency tanked to a 27-month low on end of month position squaring and partly due to a tweet from U.S. President Trump.  
  
Reuters reported Chinese and U.S. trade negotiating teams are maintaining effective communication, China's Foreign Ministry said on Friday at a daily news briefing in Beijing.  China and the United States are engaged in a tit-for-tat tarrif war involving hundreds of billions of dollars' worth of each other's goods and which threatens to engulf all trade between the countries, putting global growth at risk.   
Reuters reported U.S. President Donald Trump on Friday accused the U.S. Federal Reserve Bank of inaction as the euro slides in value against the dollar, a failing he charged gives European countries a big trade advantage.  "The Euro is dropping against the Dollar 'like crazy,' giving them a big export and manufacturing advantage...and the Fed does NOTHING!" Trump said in a Twitter post.    
"We don't have a Tariff problem (we are reigning in bad and/or unfair players), we have a Fed problem. They don't have a clue!" said Trump, a frequent critic of Fed policies.  
  
Reuters reported U.S. consumer spending increased solidly in July as households bought a range of goods and services, which could further allay financial market fears of a recession, but the pace of growth in consumption is unlikely to be sustained amid tepid income gains.    
The Commerce Department said on Friday consumer spending, which accounts for more than two-thirds of U.S. economic activity, rose 0.6% last month after an unrevised 0.3% gain in June. Economists polled by Reuters had forecast consumer spending advancing 0.5% last month.  Consumer prices as measured by the personal consumption expenditures (PCE) price index rose 0.2% in July as a drop in the cost of food was offset by a surge in energy goods and services. The PCE price index edged up 0.1% in June.  In the 12 months through July, the PCE price index increased 1.4% after gaining 1.3% in June.  
  
Versus the Japanese yen, price remained under pressure in Asia and weakened to 106.30 at European open before staging a recovery. However, the greenback met renewed selling at 106.53 in early European morning and dropped to an intra-day low at 106.11 in New York morning due to active safe-haven buying in jpy together with retreat in U.S. Treasury yields before rebounding to 106.42 on increase in U.S. consumer spending.  
  
The single currency remained under pressure in Asia and fell to 1.1034 in early European morning before staging a rebound to 1.1049 in New York morning. However, renewed selling quickly emerged and then tumbled to a 27-month trough at 1.0964 due partly to U.S. President Trump's tweet and end of month position squaring before recovering.    
The British pound traded sideways in Asia and then dropped to 1.2159 in European morning on news that a Scottish court rejected an appeal to block the parliament suspension. However, price swiftly erased its losses and gained to 1.2198 as news broke out that a hearing would take place on Sep 5 with regards to this case. Cable then rose to an intra-day high at 1.2229 (Reuters) in New York morning but fell again to session lows at 1.2140 due to selloff in euro before rebounding to 1.2170 on short-covering..  
  
Reuters reported a Scottish court on Friday rejected a request to place an interim block on Prime Minister Boris Johnson's order to suspend parliament but said it would hear full arguments next week, a lawmaker who brought the case said.  Joanna Cherry, a British lawmaker who brought the action, said the decision was not on the merits of the case and that the court showed a willingness to hear full arguments next week.    
"Court refuses interim orders at this stage but indicates willingness to hear full arguments early next week," Cherry said. "So there is no decision on merits as yet on our attempt to halt prorogation. That will happen next week."  
  
Reuters reported Legal campaigner Gina Miller's attempt to block Prime Minister Boris Johnson from suspending Britain's parliament for more than a month before Brexit will be heard by a court on Sept. 5.  
Former Prime Minister John Major has also applied to be part of the case.    
"Court hearing re @BorisJohnson proroguing Parliament will be heard next Thursday 5th September. I will be adjoined by Sir John Major," Miller tweeted.    Miller successfully challenged the government in 2017 over its authority to leave the EU without a vote in parliament.  
  
In other news, Reuters reported leaders of the European Union can see the "rough shape" of what needs to be done to help Britain and Brussels agree a new Brexit deal, Prime Minister Boris Johnson said on Friday.  "We want to do a deal, that is why we are working so hard with our friends and partners (in Europe)," he told BBC TV. "Everybody can see the rough shape of what needs to be done. Everyone has now got a fix in their heads about the kind of landing place we need to get to.    "It's going to take work, it's going to take a lot of energy for us to get there, to get rid of this old Withdrawal Agreement."  
  
On the data front, Bloomberg reported U.S. consumer sentiment fell the most in six years, slumping to the lowest level of Donald Trump's presidency as Americans expressed concern about how his tariffs will affect the economy.  The University of Michigan's final sentiment index fell to 89.8 in August from a previously reported 92.1 and 98.4 in July, data showed Friday. The gauge of current conditions dropped to the lowest since October 2016, while the expectations index matched January as the weakest since that same period.  
  
Data to be released this week:    
Australia AIG manufacturing index, business inventories, ANZ job ads, New Zealand terms of trade, import prices, export prices, Japan Nikkei manufacturing PMI, China Caixin manufacturing PMI, Swiss retail sales, manufacturing PMI, Italy Markit manufacturing PMI, France Markit manufacturing PMI, Germany Markit manufacturing PMI, EU Markit manufacturing PMI, UK Markit manufacturing PMI, Canada market holiday and U.S. market holiday on Monday.  
  
UK BRC retail sales, Markit construction PMI, Japan capital spending, Australia current account, retail sales, RBA interest rate decision, Swiss CPI, EU producer prices, Canada Markit manufacturing PMI, U.S. Markit manufacturing PMI, construction spending, ISM manufacturing PMI and New Zealand GDT price index on Tuesday.  
  
Australia AIG services index, GDP, Japan services PMI, China Caixin services PMI, Italy Markit services PMI, France Markit services PMI, Germany Markit services PMI, EU Markit services PMI, retail sales, U.S. MBA mortgage applications, good trade balance, redbook, ISM New York index and Canada trade balance, exports, imports, labour productivity rate, BOC monetary policy report on Wednesday.  
  
Australia trade balance, imports, exports, Swiss GDP, Germany industrial orders and U.S. ADP employment change, initial jobless claims, labour costs prelim, productivity prelim, Markit manufacturing PMI, durable ex-defense, durable goods, factory orders, durable ex-transport, ISM manufacturing PMI on Thursday.  
  
Australia AIG construction index, Japan all household spending, coincident index, leading indicator, Germany industrial output, Swiss unemployment rate, France current account, trade balance, imports, exports, UK Halifax house prices, Italy retail sales, EU employment, GDP, U.S. non-farm payrolls, unemployment rate, average earning and Canada employment change, unemployment rate, Ivey PMI on Friday.