Dollar falls on U.S.-China trade tensions

Market Review - 14/07/2020  23:50GMT  

Dollar falls on U.S.-China trade tensions

The greenback ended lower against its G5 peers on Tuesday due to diplomatic and trade tensions between the United States and China together with continued fears of a second wave of the coronavirus pandemic.  
  
Reuters reported the Labor Department said on Tuesday its consumer price index increased 0.6% last month after easing 0.1% in May. In the 12 months through June, the CPI climbed 0.6% after gaining 0.1% in May, which was the smallest year-on-year rise since September 2015.     Economists polled by Reuters had forecast the CPI increasing 0.5% in June and advancing 0.6% year-on-year.   
  
Versus the Japanese yen, although dollar briefly gained to 107.36 at Asian open, price fell to 107.13 on profit-taking. However, the pair later rose to session highs of 107.43 at New York morning on buying in eur/jpy cross before retreating to 107.16 on usd's broad-based weakness.  
  
Although the single currency retreated from 1.1351 in Australia to 1.1326 on profit-taking, the pair found renewed buying there and later rallied to a fresh 1-month high of 1.1408 in New York on usd's weakness together with cross-buying in euro before moving broadly sideways.  
  
The British pound moved sideways in Asia after Monday's selloff and cable met renewed selling interest at 1.2558 and then fell to 1.2507 in European morning after release of downbeat UK GDP data. The pair then dropped to a 6-day low of 1.2480 in New York before rallying to session highs at 1.2563 in New York afternoon on usd's weakness together with cross-buying of sterling especially vs euro.  
  
Reuters reported gross domestic product rose by 1.8% in May after slumping by a record 20.3% in April, Britain's first full month of lockdown, the Office for National Statistics said. This was a smaller rise than the average 5.5% increase forecast in a Reuters poll of economists.   Over the three months to May, the economy shrank by 19.1% and compared with a year ago it is 24.0% smaller.   
  
In other news, Reuters reported Britain's economy could shrink by more than 14% this year and government borrowing risks approaching 400 billion pounds ($500 billion) if there is lasting damage from the coronavirus, government budget forecasters warned on Tuesday.     The Office for Budget Responsibility said its central scenario, with only moderate scarring, showed a 12.4% fall in output, with a 14.3% decline if scarring is deeper.   
  
On the data front, Reuters reported an indicator tracking German investors' economic sentiment slipped to 59.3 points, from 63.4 points the previous month. That compared with a forecast for 60.0 in a Reuters poll of economists.    A separate gauge of current conditions rose slightly to -80.9 points, from -83.1 the previous month - but was well behind the consensus forecast of -65.0 points.   
  
Data to be released on Wednesday :  
  
Australia consumer sentiment, Japan Bank of Japan interest rate decision, UK core CPI, CPI, RPI, core RPI, PPI input prices, PPI output prices, PPI core output, DCLG house price index, Italy consumer prices, CPI (EU norm), U.S. MBA mortgage applications, NY Fed manufacturing index, import prices, export prices, industrial production, capacity utilization, manufacturing output, and Canada manufacturing sales, Bank of Canada interest rate decision.