Market Review - 11/08/2018 03:15GMT
Dollar rallies to fresh 1-year highs on safe-haven bid, euro tumbles on contagion fear due to Turkish lira rout
Dollar rallied broadly to fresh 1-year highs in 'hectic' trading on Friday due to safe-haven demand together with the Japanese yen and Swiss franc whilst the single currency tumbled to a near 13-month low on escalating political tension between United States and Turkey which triggered risk aversion and stoked market fears of contagion risk spreading to some European banks.
The European Central Bank is increasingly concerned about euro zone banks' exposure to Turkey, the Financial Times reported on Friday, sending bank shares lower as the Turkish lira hit yet another record low against the U.S. dollar.
U.S. President Donald Trump said on Friday he had authorized higher tariffs on imports from Turkey, imposing a 20 percent duty on aluminum and 50 percent one on steel, as tensions mount between the two NATO allies over Ankara's imprisonment of an evangelical pastor and other diplomatic issues.
Euro went through a highly volatile session. Although price moved sideways in subdued Asia morning, the single currency spiked down to 1.1432 at European open due to political tension between U.S. and Turkey before recovering to 1.1481. However, price met renewed selling there and tumbled to a fresh 1-year low at 1.1388 in New York after U.S. President Donald Trump's statement, the Turkish lira continued its recent selloff and hit fresh record lows of 6.801 vs usd before stabilsing.
Versus the Japanese yen, dollar initially gained to 111.16 in Australia before dropping erraticly to 110.61 in European morning. Despite staging a rebound to 111.11 in New York morning, the greenback met renewed selling and tumbled to 1-month lows at 110.52 due to renewed safe-haven buying of yen on Turkish lira rout as well as falling U.S. Treasury yields. Price last traded around 110.81 near the close.
The British pound also swung wildly in volatile trading. Although price initially recovered to 1.2838 (Reuters) at Asian open, cable tanked in tandem with euro to 1.2734 in European morning before rebounding to 1.2787 after UK GDP data came in-line with expectation. However, the pound later hit 13-month lows at 1.2723 in New York morning then recovered to 1.2792 due to short covering and cross-buying in sterling. Price later move broadly sideways in New York afternoon.
U.K. gross domestic product expanded 0.4 percent in the April-June period, as expected in a Reuters poll of economists, the Office for National Statistics said.
In other news, Reuters reported President Tayyip Erdogan pledged on Friday to defend Turkey against economic attacks and said increasing production, exports and employment was the best response to the country's challenges.
On the data front, U.S. consumer price inflation rose by an annualized 2.9% in July, the Labor Department said, missing expectations for an acceleration to 3.0%. Month-on-month, CPI rose 0.2% in July, in line with the consensus forecast.
Data to be released this week :
France non-farm payrolls, and Italy CPI, CPI (EU norm) on Monday.
Australia NAB business conditions, NAB business confidences, China industrial output, retail sales, Japan industrial output, capacity utilization, France ILO unemployment rate, Germany GDP, CPI, HICP, France CPI, CPI (EU nhorm), ZEW economic sentiment, ZEW current conditions, Swiss producer/import price, UK claimant count, ILO unemployment rate, employment change, average weekly earnings, EU GDP, industrial production, ZEW economic sentiment, and U.S. import prices, export prices, Redbook on Tuesday.
China house prices, Australia wage price index, France market holiday, Italy market holiday, UK CPI, RPI, PPI input, PPI output, DCLG house price, and U.S. labor costs, productivity, retail sales, industrial production, capacity utilization, manufacturing output, business inventories, NAHB housing market index on Wednesday.
Japan exports, imports, trade balance, Australia Westpac leading index, employment change, unemployment rate, UK retail sales, EU trade balance, U.S. building permits, housing starts, initial jobless claims, Philadelphia Fed survey, and Canada manufacturing sales, ADP employment change on Thursday.
New Zealand PPI input, PPI output, Germany wholesale price index, EU current account, HICP, Canada CPI, and U.S. leading indicator, University of Michigan sentiment on Friday.
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