· Dollar on backfoot amid economic doubts, yuan shines
The dollar was on the defensive against most currencies on Friday after a rise in U.S. jobless claims and a dip in Treasury yields dampened the appeal of holding the greenback.
The yuan jumped to a seven-month high against the dollar, showing that even U.S.-Sino diplomatic tensions were not enough to deter traders who are bullish on China’s economic outlook.
The euro, which has been the biggest beneficiary of a recent decline in the dollar, will come into focus later on Friday as traders brace for euro zone manufacturing data.
A larger-than-expected rise in weekly U.S. jobless claims came just one day after Fed officials warned that a recovery in hiring is starting to slow, raising doubts about how quickly the world’s largest economy will bounce back from the coronavirus.
Concern about the U.S. economy, combined with an excess supply of dollars already in circulation due to the Fed’s massive quantitative easing, are likely to weigh on the U.S. currency in coming weeks, analysts say.
The dollar fell slightly to $1.1874 per euro on Friday following a 0.2% decline in the previous session.
The British pound edged up to $1.3237, holding onto a 0.8% gain made on Thursday.
The onshore yuan rose to 6.8960 per dollar, the highest since January 22. Offshore, the yuan briefly hit 6.8935, its strongest since January 21.
China’s currency has recovered all of its losses since the central Chinese city of Wuhan, where the coronavirus first broke out, was first put on lockdown.
The greenback was quoted at 105.72 yen after a 0.3% decline on Thursday.
Traders in the euro are looking ahead to the release later Friday of manufacturing data for the euro zone and for Germany, Europe’s largest economy.
The growing consensus is the euro will continue to edge higher because European governments have taken decisive action on stimulus measures to support growth.
In comparison, U.S. Republicans and Democrats are still at loggerheads over additional economic stimulus, which analysts said is another reason to favor the euro over the dollar.
· U.S. Treasury yields move higher as investors look ahead to fresh economic data
U.S. government debt prices were lower on Friday morning, as investors closely monitored flash readings of purchasing managers’ index data for further clues about the pace of the economic recovery.
At around 2:15 a.m. ET, the yield on the benchmark 10-year Treasury note was higher at 0.6525%, while the yield on the 30-year Treasury bond was also up at 1.3871%. Yields move inversely to prices.
· Biden to lay out vision for post-Trump America as he accepts Democratic nomination
Joe Biden will outline his plans to bring relief and solace to a country battered by the coronavirus pandemic on Thursday when he accepts the Democratic nomination to challenge President Donald Trump in the Nov. 3 U.S. election.
His remarks will conclude a nominating convention that was held virtually because of the pandemic, with the party’s biggest names, rising stars and even prominent Republicans lining up via video to support Biden and attest to the urgency of ending Trump’s tumultuous presidency.
As they have throughout the week, Democrats emphasized the importance of voting amid the pandemic and warned against efforts to suppress the vote. Trump’s repeated, unsubstantiated claims that mail-in ballots are rife with fraud, coupled with cuts to the U.S. Postal Service, have fueled fears that some voters may be disenfranchised.
· Euro zone business recovery stuttered in August: PMIs
The euro zone’s economic recovery from its deepest downturn on record has stuttered this month, particularly in services, as the pent-up demand unleashed last month by the easing of coronavirus lockdowns dwindled, a survey showed on Friday.
So likely of concern to policymakers and diminishing hopes for a V-shaped recovery, IHS Markit’s flash Composite Purchasing Managers’ Index, seen as a good gauge of economic health, sank to 51.6 from July’s final reading of 54.9.
While still above the 50-mark separating growth from contraction it was below all forecasts in a Reuters poll which had predicted no change from July.
Meanwhile, growth in the bloc’s dominant service sector stalled - its PMI plummeted to 50.1 from 54.7, below all forecasts in the Reuters poll that predicted a small dip to 54.5.
With demand waning, services firms cut headcount for a sixth month and more sharply than in July. The employment index fell to 47.7 from 47.9.
· German recovery losing some momentum as services struggle in August: PMI
The recovery of Germany’s private sector from the coronavirus pandemic has slowed in August as activity in the service sector has unexpectedly come to a near standstill, a survey showed on Friday.
IHS Markit’s flash composite Purchasing Managers’ Index (PMI), which tracks the manufacturing and services sectors that together account for more than two-thirds of the economy, fell to 53.7 from 55.3 in July.
The reading was still above the 50 mark that separates growth from contraction, but it came in weaker than a Reuters poll of 55.0 and was the first drop after three months of gains.
The main drag came from the service sector, where the sub-index declined to 50.8 from 55.6.
Manufacturing proved more resilient with the subindex rising to 53.0 from 51.0, reaching its highest level in nearly two years.
· French business activity weaker than expected in August: PMI
French business activity has lost more momentum than expected in August, a survey showed on Friday, as firms worked off backlogs of work built-up during a coronavirus lockdown.
Data compiler IHS Markit said its preliminary purchasing managers index (PMI) fell to 51.7 points from 57.3 in July - far below the average forecast for 57.2 in a Reuters poll of economists.
The reading for the services sector stayed above the 50-point level dividing an expansion from a contraction, but the preliminary PMI reading for manufacturing came in below that level.
The dominant service sector saw its PMI reading for August fall to 51.9 points from 57.3 in July - below a forecast for a reading of 56.3 points.
The manufacturing PMI fell to 49.0 points in August - down from 52.4 in July and below a forecast for 53.7 points.
· South Africa's economy to grow strongly this quarter after record second-quarter fall: Reuters poll
South Africa’s already recession-hit economy likely suffered its deepest-ever contraction in the second quarter but is set to grow strongly in the third as curbs to contain the coronavirus pandemic ease, a Reuters poll found.
Economists lowered their forecasts again and now expect an annualised 44.5% contraction in the April-June quarter, compared with the median estimate in a July poll for a 38.7% fall.
That would be by far the biggest drop since comparable records began in 1993, the year before South Africa held its first fully democratic elections. Second quarter GDP data is due early next month.
The most pessimistic forecast was for a 53% contraction while even the most optimistic predicted 20% shrinkage.
Growth is seen recovering in the third quarter, although the forecast 18.6% rebound is not as sharp as the 19.3% predicted last month.
JP Morgan wrote that high-frequency data point to a notable recovery of activity in July and August.
However, that will not be enough to offset the previous plunge as coronavirus restrictions closed down swathes of the economy.
· UK records second-highest daily COVID cases since June as testing expands
Britain recorded 1,182 new coronavirus cases on Thursday, the second-highest daily total since June 21, government figures showed, in part reflecting the higher number of tests being processed.
Thursday’s official data showed 190,434 tests were processed, compared to 117,971 on June 21.
Britain also reported a further six deaths of people who died within 28 days of receiving a positive coronavirus test result, taking the total number of fatalities on this measure to 41,403.
· Mexico tops 59,100 coronavirus deaths
Mexico’s health ministry on Thursday reported 6,775 new confirmed cases of coronavirus infection and 625 additional fatalities, bringing the total in the country to 543,806 cases and 59,106 deaths.
The government has said the real number of infected people is likely significantly higher than the confirmed cases.
· Australia virus cases dive to five-week low
Australia headed for its lowest daily increase in coronavirus infections in five weeks on Friday as the hotspot state of Victoria neared the midway point of lockdown, prompting the prime minister to hail “a week of increased hope”.
While the rest of Australia eases restrictions, the home state of a quarter of its population is in a six-week lockdown due to a second wave of virus infections.
· India coronavirus cases surge to 2.9 million
India hurtled toward the 3 million mark for coronavirus cases on Friday, reporting 68,898 new infections in the last 24 hours, data from the federal health ministry showed.
The total number of cases in the country now stands at 2.9 million.
· Oil prices steady as producers talk up efforts to rein in supply
Oil prices held steady on Friday and were on track for a third consecutive weekly gain, pulled higher by major oil producers’ efforts to hold back output amid concerns about the pace of economic recovery from the coronavirus pandemic.
Brent crude LCOc1 futures were up 5 cents, or 0.1%, at $44.95 per barrel by 0633 GMT, heading for a 0.4% rise for the week.
U.S. West Texas Intermediate (WTI) crude CLc1 futures were unchanged at $42.82 per barrel, but on track for about a 2% rise for the week.
Both benchmark contracts fell around 1% on Thursday on economic concerns after weekly U.S. jobless claims came in higher than expected.
Reference: CNBC, Reuters
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