Dollar gains broadly on higher U.S. yields, sterling tumbles after soft inflation data

Market Review - 18/04/2018   23:23GMT  

Dollar gains broadly on higher U.S. yields, sterling tumbles after soft inflation data

The greenback ended modestly higher against its major peers on Wednesday as trade war and geopolitical tension in Syria eased. Gain in U.S. Treasury yields in New York session (benchmark 10-year yields hit 3-week high of 2.876%) also supported the greenback. While sterling took a hit after release of soft UK inflation data, suggesting Bank of England may not raise interest rates further after next month's expected hike.  
  
Versus the Japanese yen, dollar found renewed buying at 107.00 in Australia and rose to 107.39 on broad-based yen selling as rebound in U.S. stocks and Treasury yields boosted risk appetite before retreating steadily to 107.10 in New York. However, rising U.S. yields lifted price to 107.31.   
  
The single currency moved broadly sideways in Asia and fell in tandem with sterling to 1.2350 in European morning, then ratcheted lower to session lows of 1.2342 in Europe after release of EU inflation data which rose less than expected. However, price found renewed buying and climbed to 1.2397 in New York morning on cross-buying of euro especially versus gbp, price last traded at 1.2279 near the close.  
  
EU inflation rose by 1.3 percent in March, compared to the same period last year, down from Eurostat's previous estimate of 1.4 percent.  
  
The British pound went through a volatile trading session. Despite edging up to 1.4315 at European open, poor UK inflation data pressured price and cable fell sharply to session lows of 1.4173 before rebounding to 1.4246 in New York on short-covering. However, the pair met renewed selling there and retreated to 1.4298.   
  
The annual rate of change in Britain's consumer price index fell to 2.5% last month, the Office for National Statistics said on Wednesday. Economists had forecast the reading to remain steady at 2.7%.  
  
In other news, Reuters reported Italy's anti-establishment 5-Star Movement, looking to break a prolonged political deadlock, said on Wednesday the far-right League must decide by the end of this week if it wanted to join forces in a new government.   
  
Reuters reported Britain's large current account deficit is showing worrying signs of becoming increasingly financed by short-term inflows of foreign capital, rather than asset sales, a Bank of England financial regulator said.   
  
On the data front, the UK retail price index (RPI) increased by 3.3% on an annualized basis in March, compared to previous month's 3.6% rise. Analysts had expected RPI to register a 3.6% gain. Month-on-month, RPI increased by 0.1% in March, below expectations for a 0.3% advance.  
  
Data to be released on Thursday:  
  
New Zealand CPI, Australia Westpac leading index, employment change, unemployment rate, Japan tertiary industry index, EU current account, U.K. retail sales, core retail sales, initial jobless claims, leading indicator, and Canada ADP employment change