· The dollar fell from an 11-month high against a basket of major currencies on profit-taking on Thursday, while sterling recovered from a seven-month low as the Bank of England’s top economist unexpectedly supported an interest rate hike.
The Philadelphia Federal Reserve’s gauge of U.S. Mid-Atlantic business activity fell to a 1-1/2 year low, raising concern about the U.S. economy and causing some traders to book profits on bullish dollar bets, analysts said. Lower yields on U.S. Treasuries and the euro’s finding chart support in the $1.15 area also contributed to the dollar’s weakness.
“Philly Fed missed on the downside. That was a convenient excuse for traders to take profits,” said Joe Manimbo, senior market analyst with Western Union Business Solutions in Washington.
The dollar index .DXY, which tracks the greenback against six other currencies, shed 0.3 percent to 94.762 after earlier touching 95.529, its highest level since last July.
The euro rebounded from an 11-month low to $1.1618 EUR= after testing technical support in the $1.15 area.
Against the yen, the greenback lost 0.4 percent, to 110.93 yen JPY=.
· Elsewhere, sterling GBP=D3 rose nearly 0.7 percent at $1.3257, recovering from a seven-month trough after the Bank of England's chief economist, Andy Haldane, unexpectedly joined the minority of policymakers calling for rates to rise to 0.75 percent, citing concerns about growing wage pressure.
Haldane’s vote, however, was not enough to flip the BOE’s decision to leave key borrowing costs at 0.5 percent.
· The Bank of England bolstered expectations that at its next meeting it will raise rates for only the second time in a decade, after its chief economist unexpectedly joined the minority of policymakers voting for a hike on Thursday.
The central bank also gave new guidance on when it might start to sell its 435 billion pounds ($574 billion) of British government bonds, saying this could come once rates have reached around1.5 percent, compared with previous guidance of 2 percent.
Sterling rallied against the dollar on the news, heading for its biggest daily gain in two months. Short-dated bond yields jumped as markets priced in higher BoE rates.
“The likely timing of the next hike is less finely balanced than the markets expected. The surprising switch by BoE Chief Economist (Andy) Haldane to support an immediate rate hike puts August firmly on the table,” Lloyds economist Jeavon Lolay said.
· The 35 largest U.S. banks are poised to put more money toward dividends, share buybacks and business investments, after clearing the first stage of an annual regulatory stress test on Thursday, showing they have enough capital to withstand an extreme recession.
· U.S. President Donald Trump said on Thursday North Korea was blowing up four of its big test sites and that a process of “total denuclearization ... has already started,” but officials said there was no such evidence since a landmark summit last week.
· The International Monetary Fund is likely to revise down its growth forecasts for the euro zone as the area faces higher risks from trade, Britain’s talks to leave the bloc and market jitters over fiscal easing in Italy and other states.
Japanese manufacturing activity expanded in June at a faster pace than the previous month but export orders contracted for the first time in almost two years in a warning sign about overseas demand, a preliminary survey showed on Friday.
The flash Markit/Nikkei Japan Manufacturing Purchasing Managers Index (PMI) rose to a seasonally adjusted 53.1 in June from a final 52.8 in May.
· Global benchmark Brent crude fell more than 2 percent on Thursday ahead of a meeting of the Organization of the Petroleum Exporting Countries, where producers were expected to boost output to stabilize prices.
Brent crude LCOc1 fell $1.69 to settle at $73.05 a barrel.
U.S. West Texas Intermediate crude CLv1 for August delivery, the new front month, fell 17 cents to $65.54 a barrel, and was down 68 cents from the July contract’s expiry on Wednesday at $66.22.
· OPEC scrambled on Thursday to agree on raising oil output, with Saudi Arabia warning of shortages but Iran holding out against a deal amid the prospect of lower exports due to U.S. sanctions on Tehran.
The Saudi and Russian energy ministers said a production increase of about 1 million barrels per day (bpd) or around 1 percent of global supply had become a near-consensus proposal for the group and its allies, but Iran’s assent was vital.
The Organization of the Petroleum Exporting Countries meets on Friday to decide output policy amid calls from top consumers such as the United States, China and India to cool down oil prices and support the world economy by producing more crude.
Iran, OPEC’s third-largest producer, has so far been the main barrier to a new deal as it said on Tuesday OPEC was unlikely to reach an agreement and should reject pressure from U.S. President Donald Trump to pump more oil.
Reference: Reuters
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