Dollar pared its recent losses in New York morning on Friday as comments by Fed chief J. Powell on bond tapering triggered broad-based short-covering rebound, however, the Japanese remained on the back foot due to intra-day decline in U.S. treasury yields.
Reuters reported Federal Reserve Chairman Jerome Powell said the U.S. central bank should begin reducing its asset purchases soon, but should not yet raise interest rates. Powell said employment is still too low and high inflation will likely abate next year as pressures from the COVID-19 pandemic fade, even as many market participants are concerned that rising price pressures will last longer than policymakers believe.
Versus the yen, despite initial recovery to 114.80 in Asian morning, the pair came under steady selling due to broad-based yen buying, intra-day decline gathered pace in New York and hit session lows of 113.42 as benchmark 10-year yield continued to retreat from its Thursday's 5-month high of 1.7064% to 1.6342% near Friday's close.
The single currency swung broadly sideways in choppy trading as market focus continued to be on other usd majors. Although price ratcheted higher from 1.1622 at Asian open to 1.1655 in New York morning, hawkish comments by Fed J. Powell swiftly knocked price to 1.1623 but later rebounded. Euro last traded at 1.1641 near the close.
Sterling also moved in choppy fashion in hectic trading. Although price swung broadly sideways in Asia and European morning and rose from 1.3771 to 1.3815 after upbeat U.K. services PMI, broad-based cross selling in sterling later knocked price lower in New York morning and price hit session lows of 1.3736 after Fed Powell's bond tapering comment before staging a recovery to 1.3761.
More news from Reuters, Britain's economy unexpectedly regained momentum in October and cost pressures rose by the most in more than 25 years, according to a survey on Friday that could encourage the Bank of England to raise interest rates for the first time since the pandemic. The preliminary "flash" IHS Markit/CIPS flash Composite Purchasing Managers' Index rose by the largest amount since May to hit 56.8 from September's 54.9. By contrast, a Reuters poll of economists had pointed to a further slowdown to 54.0. "The UK economy picked up speed again in October, but the expansion is looking increasingly dependent on the service sector, which in turn looks prone to a slowdown amid the recent rise in COVID-19 cases," said IHS Markit's chief business economist, Chris Williamson.
Data to be released next week :
New Zealand Market Holiday, Japan coincident index, leading indicator, Germany Ifo business climate, Ifo current conditions, Ifo expectations, U.S. national activity index and Dallas Fed manufacturing business index on Monday.
U.S. building permits, redbook, monthly home price, consumer confidence, new home sales and Richmond Fed manufacturing on Tuesday.
New Zealand imports, trade balance, exports, NBNZ business outlook, NBNZ own activity, U.K. BRC shop price index, Australia CPI, Germany Gfk consumer sentiment, Frnace consumer confidence, producer prices, Italy trade balance non-EU, Swiss investor sentiment, U.S. MBA mortgage application, durable goods, durable ex-transport, durables ex-defense, goods trade balance, wholesale inventories, and Canada BOC interest rate decision on Wednesday.
Japan retail sales, BoJ interest rate decision, Australia export prices, import prices, U.K. nationwide house price, Germany unemployment change, unemployment rate, Italy business confidence, consumer confidence, producer prices, EU business climate, economic sentiment, industrial sentiment, services sentiment, consumer confidence, ECB refinancing rate, ECB deposit rate, Germany CPI, U.S. GDP, PCE prices, initial jobless claims, continuing jobless claims, pending home sales, KC Fed manufacturing and Canada average weekly earnings on Thursday.
Japan Tokyo CPI, unemployment rate, industrial output, construction orders, housing starts, Australia PPI, retail sales, France GDP, CPI, Germany import prices, GDP, Swiss KOF indicator, Italy GDP, CPI, U.S. personal income, personal spending, PCE price index, employment wages, employment costs, Chicago PMI, University of Michigan sentiment, Canada GDP, producer prices and budget balance on Friday.
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