· The dollar weakened against most major currencies on Friday, weighed down by an unexpected decline in U.S. retail sales last month that once again dimmed expectations for an interest rate increase in December.
That pushed the dollar index to 91.779 .DXY, down 0.4 percent on the day, while the euro EUR= rose 0.33percent to $1.1957. The Japanese yen weakened 0.56 percent against the greenback at 110.86 per dollar and sterling GBP= traded at $1.3591, up 1.46 percent on the day.
· The dollar held firm near a seven-week high versus the yen on Monday, supported by recent rises in U.S. Treasury yields, while sterling stood tall, buoyed by growing expectations the Bank of England could raise interest rates soon.
The dollar edged up 0.3 percent against the yen to 111.17 yen JPY=, trading within sight of Friday's peak at111.33 yen, the dollar's highest level since late July.
· Trading is likely to be thinner than usual on Monday, with Japanese markets closed for a public holiday.
· U.S. retail sales unexpectedly fell in August as Hurricane Harvey likely depressed motor vehicle purchases, dropping 0.2 percent last month. Economists polled by Reuters had forecast retail sales nudging up 0.1 percent.
· U.S.industrial output recorded its biggest drop since 2009 as Hurricane Harvey disrupted activity, suggesting the storm could dent economic growth in the third quarter.
· Harvey, which lashed Texas in the last week of August, also has impacted the labor market. Hurricane Irma, which struck Florida last weekend, also is likely to hurt the economy, though analysts expect a rebound in the fourth quarter.
In a separate report on Friday, the Federal Reserve said industrial production declined 0.9 percent in August. That was the biggest drop since May 2009 and followed six straight monthly gains.
· The New York Federal Reserve on Friday reduced its estimate of U.S. gross domestic product growth for the third quarter and fourth quarter to below 2 percent, based on unexpected falls in industrial output and retail sales in August.
The regional central bank’s “Nowcast” model calculated the economy was expanding at an annualized pace of 1.34 percent in the third quarter, slower than 2.06 percent last week. Its GDP estimate for the fourth quarter was lowered to 1.82 percent from 2.62 percent a week earlier.
· On the other hand, the economic damage brought by Hurricanes Harvey and Irma will likely become a drag on interest rate hikes. The likelihood of a December rate hike, according to the CME’s FedWatch tool, has risen from 41% to 50% in a day.
· The focus for this week is the Fed’s Sept. 19-20 policy meeting.
The Fed is seen likely to announce a plan to start shrinking its balance sheet at the meeting, but is widely expected to keep interest rates unchanged.
· Goldman Sachs economists on Friday lowered their tracking estimate on U.S. economic growth in the third quarter to 1.6 percent from 2.0 percent on signs of Hurricane Harvey already dampening business activities in August.
They said they expect some of the weakness would reverse in the fourth quarter as businesses rebound in Texas where Harvey inflicted the heaviest damage.
· Barclays economists on Friday slashed their view of U.S. economic growth in the third quarter at 2.0 percent from 2.8 percent in the wake of the August readings on domestic inflation, retail sales and factory output released this week.
· Michael Cohen, one of President Donald Trump’s closest business advisers, said on Sunday he would testify on Tuesday to the U.S. Senate Intelligence Committee, as the panel investigates alleged Russian interference in the 2016 U.S. election.
· After years of bailing out Greece, the idea of letting more poorer states into the euro zone has sparked controversy, particularly in Germany, where Chancellor Angela Merkel is seeking re-election in two weeks time.
The backlash came after European Commission President Jean-Claude Juncker called on Wednesday for non-euro zone countries to quickly adopt the single currency so that the European Union can find new unity in the euro after Britain leaves in 2019.
Juncker promised to propose technical and financial help for the willing, quickly triggering concern from influential German members of the European Parliament, like the deputy chairman of the economic committee Markus Ferber.
Juncker’s call was interpreted by some in Germany as
· Brent oil prices held near five-month highs on Friday, and were on track for the biggest weekly gain since late July, on forecasts for rising demand and the gradual restart of U.S. oil refineries.
Brent crude LCOc1 was down 3 cents at $55.44 a barrel by 1:11 p.m. EDT (1711 GMT), in a volatile session that saw it stretch from an intraday low of $54.86 to a high of $55.85 a barrel.
The benchmark was on track for its third straight weekly gain, rising 3.1 percent so far, which would be the highest weekly rise since the end of July.
U.S. West Texas Intermediate crude CLc1 was down 21 cents at $49.68 a barrel. The contract looked set for a nearly 5 percent weekly gain, also its strongest in almost two months.
· The Organization of the Petroleum Exporting Countries this week forecast higher demand for its oil in 2018 and pointed to signs of a tighter global market, indicating its deal with non-OPEC states to cut output is helping tackle a glut.
· That was followed by a report from the International Energy Agency (IEA) saying the glut was shrinking thanks to strong European and U.S. demand, as well as production declines in OPEC and non-OPEC countries.
Reference: Reuters, CMC Markets
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