· The dollar fell broadly on Friday in the wake of cautious comments from two U.S. Federal Reserve officials about global economic growth, while sterling rose following losses tied to fears about a Brexit deal.
The greenback fell to one-week lows versus the euro and a two-week trough against the yen following comments from Fed Vice Chair Richard Clarida, who told CNBC television he saw some evidence that global growth was cooling.
Clarida also noted key U.S. short-term borrowing rates are close to neutral and said being at neutral “makes sense.”
· Traders perceived his comments to mean the No. 2 Fed official may be open for the Fed to pause its rate-hike campaign sooner than previously thought.
· “You have seen a dovish tilt from some Fed officials. That put pressure on the dollar,” said Chuck Tomes, senior investment analyst at Manulife Asset Management in Boston.
· Separately, Dallas Federal Reserve President Robert Kaplan said on Fox Business that global growth will be a bit of a headwind, which may spread to the United States.
· Clarida and Kaplan's remarks spurred selling in the dollar, which fell 0.7 percent against the euro EUR=EBS at $1.141.
Against the yen, the greenback JPY=EBS was down 0.7 percent at 112.82 yen.
· Chicago Fed President Charles Evans acknowledged some economic risks ahead but he also raised the probability the Fed could raise rates above what would be neutral if U.S. data come in stronger than forecast.
· The dollar also weakened against sterling, reversing some of Thursday’s gains.
The pound briefly recovered against the euro following its worst day versus the single currency in about 25 months, as U.K. Prime Minister Theresa May clinched backing from some key Brexit supporters with her draft plan for Britain to leave the European Union in March.
A string of cabinet ministers quit on Thursday in protest over the terms in May’s Brexit proposal. The resignations sent the pound reeling.
Sterling GBP=D3 was last up 0.42 percent versus the dollar at $1.2829 but was down 0.31 percent versus the euro EURGBP=D3 at 88.945 pence.
· The euro was also bolstered by hopes that Italian Prime Minister Giuseppe Conte was looking to work with the EU over his government’s 2019 budget, which has been rejected by Brussels.
Meanwhile, currency traders are monitoring signs that Washington and Beijing are seeking to de-escalate their trade dispute.
U.S. President Trump said he might not impose more tariffs on Chinese imports if China comes up with terms that he and Beijing could agree on.
The yuan in offshore trading CNH=EBS edged up 0.13 at 6.92 per dollar.
· Britain’s former Brexit minister Dominic Raab said on Sunday that Prime Minister Theresa May’s Brexit deal was fatally flawed but she could still change course.
Raab, who resigned on Thursday saying he could not support the deal, said he would back May if there was a confidence vote and that talk of a leadership challenge was distracting when the government should be focused on delivering Brexit.
British Prime Minister Theresa May said on Sunday the next seven days in the Brexit process would be critical for the country’s future.
“These next seven days are going to be critical, they are about the future of this country,” May told Sky News.
Britain crashing out of the European Union without a divorce deal would have disastrous consequences for companies and workers in Britain and across Europe, the head of the BDI German Federation of Industry said on Saturday.
Dieter Kempf told Funke Mediengruppe newspaper chain that a no-deal Brexit would hit the automotive, aerospace, chemical, pharmaceutical, engineering and electrical industries particularly hard. But service industries including banking and tourism would also be affected.
· A Chinese official said on Sunday that Asia-Pacific leaders could not issue the traditional communique at the end of the regional APEC forum, held in Papua New Guinea
Disagreement over the future of multilateral trade was a sticking point, PNG Foreign Minister Rimbink Pato told Reuters earlier.
· Chinese President Xi Jinping intends to visit North Korea next year after receiving an invite from North Korean leader Kim Jong Un, South Korea said on Saturday, which would make Xi the first Chinese leader to do so since 2005.
· China should cut corporate and personal income taxes to support the slowing economy amid a trade dispute with the United States, former Chinese finance minister Lou Jiwei said on Sunday.
· Oil ended slightly firmer after volatile trading on Friday, supported by expectations that the Organization of the Petroleum Exporting Countries would agree to cut output next month, though prices fell for the sixth straight week amid global oversupply concerns.
OPEC kingpin Saudi Arabia is keen for the major producers to cut output by about 1.4 million barrels per day, around 1.5 percent of global supply, to support the market, sources told Reuters this week. But other producers, including Russia, have been reluctant to agree to a cut.
Brent settled up 14 cents, or 0.2 percent, at $66.76 a barrel. The global benchmark fell 4.6 percent in the week, the sixth consecutive decline.
U.S. crude settled unchanged at $56.46 a barrel after trading between $55.89 and $57.96. The contract, which had its steepest one-day loss in more than three years on Tuesday, fell 5.6 percent in the week, also its sixth straight weekly decline.
Reference: Reuters
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