Dollar rebounds on robust U.S. retail sales, euro tumbles after ECB Rehn's dovish comments

Market Review - 15/08/2019  23:55GMT  

Dollar rebounds on robust U.S. retail sales, euro tumbles after ECB Rehn's dovish comments

The greenback recovered in New York session after release of upbeat U.S. retail sales data which eased concerns about the U.S. economy entering a recession and ended mixed on Thursday. The single currency tumbled to a near 2-week low in NY morning after European Central Bank's rate-setting committee member Olli Rehn said there is need for significant easing package in September for latest bond yield falls.  
  
Reuters reported U.S. retail sales surged in July as consumers bought a range of goods even as they cut back on motor vehicle purchases, which could help to assuage financial markets' concerns that the economy was heading into recession.  The Commerce Department said on Thursday retail sales rose 0.7% last month. Data for June was revised slightly down to show retail sales gaining 0.3% instead of increasing 0.4% as previously reported.    
Economists polled by Reuters had forecast retail sales would rise 0.3% in July. Compared to July last year, retail sales increased 3.4%.    
In an interview with the Wall Street Journal, the European Central Bank's rate-setting committee member Olli Rehn said the bank's package of stimulus measures, which will be announced in September, could overshoot investors' expectations.  "It's important that we come up with a significant and impactful policy package in September," Rehn told the WSJ.  
  
Versus the Japanese yen, the greenback traded sideways in Asia before jumping to an intra-day high at 106.78 at European open, however, the pair erased its gains and dropped to session lows at 105.71 in European morning on active cross-buying in jpy. Later, dollar staged a rebound to 106.34 at New York open on upbeat U.S. data and then moved broadly sideways.  
  
The single currency traded with a steady bias in Asia and recovered to 1.1158 ahead of New York open, however, the pair met broad-based selling  
after ECB Rehn's dovish comments together with usd's strength and tumbled to a 10-day low at 1.1092 in New York morning before edging back to 1.1118 on short covering.  
  
The British pound dipped to 1.2050 in Asian morning before rallying to an intra-day high at 1.2150 ahead of New York open on upbeat UK retail sales together with news that UK opposition leader Corbyn is gathering support for a vote of no-confidence to prevent no-deal Brexit. However, cable then pared its gains and retreated to 1.2080 near New York close due to usd's renewed strength.  
  
Reuters reported British retail sales edged up unexpectedly in July, helped by the strongest growth in online spending in three years, suggesting consumers continued to support the economy ahead of the Oct. 31 Brexit deadline.  Monthly retail sales volumes rose 0.2%, the Office for National Statistics said on Thursday, compared with a median forecast for a 0.2% decline in a Reuters poll of economists and following a 0.9% surge in June.    
Compared with July 2018, sales were up by 3.3%, slowing from robust growth of 3.8% in June. The Reuters poll had pointed to annual sales growth of 2.6%.    
Consumers have so far largely taken Brexit in their stride, helped by modest inflation and wages growing at their fastest rate in 11 years.    

Reuters reported Jeremy Corbyn, the veteran socialist leader of Britain's opposition Labour Party, cannot run an emergency government to stop a no-deal Brexit, the head of the Liberal Democrat Party Jo Swinson said on Thursday.    
Corbyn wrote on Wednesday to Swinson, other party leaders and senior politicians opposed to leaving the European Union without a deal. He urged them to back a no-confidence vote in Prime Minister Boris Johnson with him leading a caretaker government to extend the Brexit deadline and hold an election.    
Swinson said Britain might need an emergency government but Corbyn could not be its leader, adding when parliament returned lawmakers could pass legislation to prevent a no-deal EU exit.  
  
In other news, Reuters reported China has to take necessary counter-measures to the latest U.S. tariffs on $300 billion of Chinese goods, the finance ministy said on Thursday.  The ministry also said the U.S. tariffs violate a consensus reached by leaders of two countries and get off the right track of resolving disputes via negotiation.  
  
The United States said early this month it would slap duties on $300 billion of Chinese goods from Sept. 1, which would effectively cover all of China's exports to the United States.  But President Donald Trump backed off part of the plan on Tuesday, delaying duties on some of the items on the list such as cellphones, laptops and other consumer goods, in the hopes of blunting their impact on U.S. holiday sales. Tariffs will still apply to those products from mid-December.  
  
  
Data to be released on Friday :  
  
New Zealand manufacturing PMI, EU trade balance and U.S. building permits, housing starts, University of Michigan consumer sentiment.