Dollar regains traction and hits 7-month highs on easing of U.S./N. Korean tension

Market Review - 26/05/2018  02:16GMT  

Dollar regains traction and hits 7-month highs on easing of U.S./N. Korean tension

The greenback caught a bid on Friday and ended the day broadly higher as U.S.-North Korea tension eased after North Korea stated that door is still open for talks with United States. Euro tumbled on political uncertainty in Italy as well as Spain.   
  
Reuters reported North Korea's vice foreign minister Kim Kye Gwan said the North is open to resolving issues with the United States whenever and however after U.S. President Donald Trump called off a June summit with its leader, Kim Jong Un.  
  
Versus the Japanese yen, despite rising to 109.74 in Asian morning on dovish statement by North Korea, dollar erased intra-day gains and fell to 109.34 in European morning, then ratcheted lower to session lows of 109.13 due to selloff in the U.S. Treasury yields before rebounding to 109.56 at the close on short-covering.  
  
The single currency remained under pressure in Asia and fell to 1.1685 in European morning as U.S.-North Korea tension eased. Despite recovering to 1.1734 on better-than-expected Germany Ifo data, price met renewed selling and tumbled to a fresh 6-month low of 1.1647 in New York morning due to political concern in Italy and Spain, price ended near the day's low at 1.1647.  
  
The Munich-based Ifo economic institute said its business climate index, based on a monthly survey of companies, rose to 102.2 from 102.1 in May. The reading was better than economists' expectations for 102.0. The current assessment index rose to 106.0 in May, also better than consensus of 105.5.  
  
Reuters reported Spain's Ciudadanos party on Friday said it was ready to put forward its own motion of no confidence against Prime Minister Mariano Rajoy over a graft case involving members of his People's Party.   
  
"If Rajoy does not call snap elections we would be ready to put forward (our own) motion of no confidence in order to hold elections," Jose Manuel Villegas a senior member of the pro-business Ciudadanos said during a press conference.  
  
The British pound initially fell to 1.3362 in Asian morning, then ratcheted lower to 1.3331 in European morning. Despite recovering to 1.3377 on in-line UK GDP data, Brexit concern outweighed and tumbled to a fresh 5-month low of 1.3293 at the close.  
  
UK GDP grew by 1.2% on a year-to-year basis in the quarter, unchanged from the preliminary estimate and in line with expectations. On a quarterly basis, growth came in at 0.1%, which was also in line with expectations for no change from the preliminary reading.  
  
Reuters reported Britain is aware of the short time available for talks on its departure from the European Union, the country's finance minister said on Friday, and is working on "all sort of options" to maintain the border between Northern Ireland and Ireland open after it leaves.   
  
In other news, Reuters reported sluggish growth has not weakened the European Central Bank's resolve to end a bond-buying scheme later this year but could make it more cautious about signalling interest rate hikes, conversations with four sources close to the matter indicate.   
  
On the data front, U.S. durable-goods orders fell 1.7% last month, the Commerce Department said. Economists had forecast a 1.4% decrease. Excluding the volatile transportation sector, orders increased 0.9% in April. That beat expectations for a rise of 0.5%. A key measure of business investment, meanwhile, rose in April. Orders for non-defense capital goods excluding aircraft, a closely watched proxy for business spending plans, rose by 1.0% from a month earlier. Economists had expected an increase of just 0.7%.  
  
Data to be released this week :  
  
UK market holiday, Swiss non-farm payrolls, Italy producer prices, and U.S. market holiday on Monday  
  
Japan unemployment rate, Germany imports, Swiss import, export, trade balance, Italy business confidence, consumer confidence, France consumer confidence, and U.S. Case-Shiller home price, conumser confidence, Dallas Fed manufacturing business index on Tuesday  
  
New Zealand building permits, Japan retail sales, consumer confidence index, Australia building permits, Germany retail sales, unemployment change, unemployment rate, CPI preliminary, HICP preliminary, France consumer spending, Swiss KOF indicator, ZEW investor sentiment, EU business climate, economic sentiment, industrial sentiment, services sentiment, consumer confidence final, U.S. MBA mortgage application, ADP employment change, GDP annualized, GDP deflator, core PCE prices preliminary, PCE prices preliminary, goods trade balance, wholesale inventories, Redbook, and Canada producer prices, Bank of Canada interest rate decision on Wednesday  
  
Japan industrial production, construction orders, housing starts, China NBS non-manufacturing PMI, NBS manufacturing PMI, New Zealand ANZ business outlook, ANZ activity outlook, Swiss GDP, retail sales, France CPI (EU norm) preliminary, producer prices, U.K. Gfk consumer confidence, mortgage approvals, Italy unemployment rate, CPI preliminary, CPI (EU norm) preliminary, EU HICP, core HICP, unemployment rate, U.S. personal spending, personal income, core PCE price index, PCE price index, initial jobless claims, Chicago PMI, and Canada GDP, GDP annualized on Thursday  
  
Australia AIG manufacturing index, HIA new home sales, Japan Nikkei manufacturing PMI, China Caixin manufacturing PMI, Swiss manufacturing PMI, France Markit manufacturing PMI, Italy Markit manufacturing PMI, GDP, Germany Markit manufacturing PMI, EU Markit manufacturing PMI, U.K. Markit manufacturing PMI, U.S. non-farm payrolls, private payrolls, unemployment rate, average earnings, Markit manufacturing PMI, construction spending, ISM manufacturing, and Canada Markit manufacturing PMI on Friday