China trade data props euro above three-month lows

The euro held above a three-month low on Thursday as improved Chinese trade data and hopes of progress in China-U.S. trade talks lifted risk sentiment, with the Australian dollar leading gains by more than half a percent.

Even economic data showing Germany’s economy stalled in the fourth quarter of 2018 failed to pull the euro lower. Traders said the nearly 2 percent drop by the euro in the first six weeks of the year may have been overdone.

“There is already a lot of bad news priced into the euro at these levels,” said Kenneth Broux, a currency strategist at Societe Generale in London.

Massive option expiries amounting to $1.2 billion around $1.13 were expected to keep the euro spot market in a tight range.

Risk appetite grew after China reported dollar-denominated exports rose 9.1 percent in January from a year earlier and imports dropped 1.5 percent.

The strong trade data fuelled gains by the Chinese currency in the offshore market. The yuan gained a quarter of a percent to 6.7635.

The Australian dollar, a barometer for global risk appetite, was up 0.6 percent at $0.7132 and on track for its best three-day rising streak so far this year.

Bloomberg reported President Donald Trump was considering pushing back by 60 days a March 1 deadline for resolving trade disputes with China, citing people familiar with the matter. On Wednesday, Trump had said the talks were “going along very well”.

Elsewhere, German data showed its economy stalled in the final quarter of 2018, narrowly avoiding recession. But the numbers were in line with forecasts and weak eurozone GDP data for the quarter had already tempered expectations.

The euro was up at $1.1268 and just above a three-month low of $1.1248.

Dollar near six-week highs as trade, growth worries ramp up

The dollar rose against most other currencies on Monday, holding near a six-week high as fresh worries about U.S.-Sino trade tensions and global growth drove appetite for safe-haven assets.

“U.S.-China talks are the big focus for the week and the dollar strength is indicative of the cautious market sentiment right now owing to its safe-haven status,” said Nick Twidale, chief operating officer at Rakuten Securities.

“The Aussie dollar and the euro are at vulnerable levels right now and further dampening in risk sentiment can lead to further downside in these currencies.”

U.S. negotiators will this week press China on longstanding demands that it reform how it treats U.S. companies’ intellectual property in order to seal a trade deal that could prevent tariffs from rising on Chinese imports.

The dollar gained 0.1 percent versus the yen to 109.82. However, traders expect moves in dollar/yen to be small on Monday as Japanese markets remain shut for a public holiday.

The dollar index, a gauge of its value versus six major peers, was marginally higher at 96.64, on track for its eighth straight day of gains.

Trade tensions between the world’s two largest economies have been a major driver of global investor sentiment over the past year. Market confidence took a hit last week when U.S. President Donald Trump said he did not plan to meet with Chinese President Xi Jinping before a March 1 deadline set by the two countries to achieve a trade deal.

Trump has vowed to increase U.S. tariffs on $200 billion worth of Chinese imports to 25 percent from 10 percent currently if the two sides cannot reach a deal by March 2.

The euro was marginally lower versus the greenback at $1.1322 in early Asian trade while the Aussie was 0.15 percent higher at $0.7099, after a disastrous week in which it lost 2.2 percent.

The strength in the dollar has come despite the Federal Reserve taking a dovish stance at its last policy meeting in January. For now, investors are piling into the safety of the greenback due to fears of a sharp global economic slowdown.

The euro came under pressure as core European government debt yields touched their lowest in over two years. The single currency has lost 2.5 percent so far this month.

Benchmark German yields were just 10 basis points away from zero percent.

The European Commission sharply cut on Thursday its forecasts for euro zone economic growth for this year and next with the bloc’s largest economies expected to be held back by global trade tensions and domestic challenges.

Last month, the International Monetary Fund also downgraded its forecasts for global growth.

Elsewhere, sterling was down 0.1 percent at $1.2935. Traders expect the pound to remain volatile amid heightened political uncertainty over the Brexit process.

Dollar gains as growth worry sparks flight to safety; Aussie weakens

The dollar held near a two-week high on Friday, as demand for safe-haven assets rose on uncertainties about the path of U.S.-China trade negotiations and broader worries about slowing global growth.

Such concerns were brought to the fore on Thursday after the European Commission sharply cut its forecasts for euro zone economic growth this year and next on expectations the bloc’s largest countries will be held back by global trade tensions and domestic challenges.

Investors’ anxieties about the global economy were also compounded by comments from U.S. President Donald Trump, who said he did not plan to meet with Chinese President Xi Jinping before a March 1 deadline to achieve a trade deal.

“The dollar is being supported by worries over global growth and external factors,” said Sim Moh Siong, currency strategist at Bank of Singapore.

“Markets are waiting to see what policy measures can stabilise growth worldwide…until then, it’s hard to see the dollar weakening.”

The dollar index, a gauge of its value versus six major peers was up by around 0.1 percent at 96.59, sitting just shy of its two-week high.

The index has gained for six straight sessions in a row. This was mainly due to a weaker euro, which has around 58 percent weightage in the index, and came despite the Federal Reserve’s dovish shift on interest rates last week.

The Aussie dollar fell 0.3 percent to $0.7076 in Asian trade as the Reserve Bank of Australia cut its growth forecasts.

The Aussie has shed 2.4 percent of its value so far this week after the central bank signalled a shift from its long-standing tightening bias earlier this week.

But some analysts see limited downside for the Aussie.

“Aussie dollar should find technical support at $0.70 versus the dollar..quite a lot of bad news is priced in already and rising iron-ore prices should also be supportive,” Bank of Singapore’s Sim added.

The euro was marginally lower at $1.1338, on track to post its fifth straight day of losses. The single currency has been stumbling due to weaker-than-expected growth data out of the euro zone and expectations that the European Central Bank will keep monetary policy accommodative this year.

Philip Wee, currency strategist at DBS, thinks it is likely the euro will depreciate below $1.10 this year on Europe’s relatively weaker growth and inflation outlook against that of the United States.

The yen was steady at 109.74. Analysts think Japanese demand for foreign bonds has supported dollar/yen. The greenback gained around 0.8 percent versus the yen over the last week.

Sterling was marginally lower at $1.2950. Traders expect the British pound to remain volatile in the near term due to the uncertainty surrounding Brexit.

The United Kingdom is currently on course to leave the European Union on March 29 without a deal unless British Prime Minister Theresa May can convince the bloc to reopen the divorce agreement she reached in November.

The greenback was 0.1 percent higher versus the Canadian dollar at C$1.3319, on track to post its largest percentage gain since mid-June. Canada is a major producer of commodities, including oil, and the loonie has been under pressure due to falling energy prices.

The Bank of Canada said in January that low oil prices and a weak housing market hurt the economy in the fourth quarter of 2018 and would continue to drag on growth in the first quarter of this year. Traders expect the central bank to keep rates steady at its next policy meeting in March.

Aussie under pressure after RBA’s dovish shift, yen firmer

The Australian dollar remained near a two-week low on Thursday, as investors wagered that interest rates would most likely be cut this year due to mounting growth risks at home and abroad.

Australia’s central bank on Wednesday opened the door to a possible rate cut as it acknowledged growing economic risks in a remarkable shift from its long-standing tightening bias that sent the local dollar sliding.

In early trade, the Aussie dollar was marginally lower at $0.7103, having lost 1.8 percent in the previous session, its largest percentage decline in more than a year.

“We have a clear trading range for the Aussie dollar. The shift in the RBA’s stance will likely make the Aussie test the $0.70 level versus the dollar,” added Michael McCarthy, chief markets strategist at CMC Markets.

The New Zealand dollar was flat at $0.6765, after falling 0.1 percent earlier in the session after weaker-than-expected unemployment data on Thursday. On Wednesday, the kiwi tracked the Aussie dollar’s fall, losing 1.72 percent, its steepest percentage decline since Aug. 9, 2018.

The yen was steady versus the greenback at 109.91. The dollar has gained around one percent versus the Japanese currency so far this month as global risk sentiment improved leading to a modest rally in global equities.

The dollar index, a gauge of its value versus six major peers was steady at 96.35, hovering close to its two-week high in early Asian trade.

The dollar index has gained for three consecutive sessions, mainly thanks to a weaker euro, which constitutes around 58 percent of the index.

The single currency was flat at $1.1364, having lost 0.45 percent of its value on Wednesday. The euro has lost around 1.3 percent over the last week as investors bet that the European Central Bank will keep monetary policy accommodative due to weaker-than-expected growth and low inflation in the common area.

Elsewhere, sterling was marginally higher at $1.2930. The British pound has weakened by 1.3 percent in February due to Brexit woes. The United Kingdom is currently on course to leave the European Union on March 29 without a deal unless British Prime Minister Theresa May can convince the bloc to reopen the divorce agreement she reached in November and then sell it to skeptical British lawmakers.

The Bank of England is scheduled to meet later on Thursday and is widely expected to keep interest rates unchanged.

“The BoE won’t even consider changing interest rates until the terms to leaving the EU become clear,” said Kathy Lien, managing director of currency strategy at BK Asset Management.

“BoE Governor Mark Carney will reiterate his warning about the risks of a disorderly Brexit and reassure investors that they are ready to increase stimulus if it causes a major disruption in the markets,” added Lien.

Dollar settles near 2-week highs on rate view; Aussie slumps

The dollar settled near a two-week high versus its rivals on Wednesday as U.S. President Donald Trump’s State of the Union speech failed to surprise currency traders with markets more focused on the near-term outlook for monetary policy.

Both the U.S. Federal Reserve and the European Central Bank have signaled a cautious monetary outlook in recent days with the Fed’s pause proving a relatively bigger surprise for markets.

However, weak data has dogged euro zone policymakers with some officials reluctant to alter guidance on interest rates as a move could tie the hands of the central bank’s next president months before an appointment is made, according to sources.

As a result, the euro has failed to shake itself out of a broad $1.13-1.15 range it has traded within for the last three months.

“Markets are becoming increasingly sensitive to the outlook for monetary policy and any shifts or changes in thinking can trigger large moves,” said Thu Lan Nguyen, a forex strategist at Commerzbank based in Frankfurt.

That shift in policy thinking was evident in the slump of the Australian dollar after its central bank opened the door to a possible rate cut in a remarkable shift from its long-standing tightening bias.

The policy shift stunned investors as only just the previous day the Reserve Bank of Australia steered clear of an easing signal when holding its official cash rate at a record low 1.50 percent for the 30th straight month.

The Australian dollar plunged 1.5 percent to $0.7133, set for its biggest daily drop in a year, and market analysts rushed to change their interest rate forecasts.

In broader currency markets, the dollar consolidated at a two-week high against rivals with investors focused on incoming U.S. data.

In an annual speech on Tuesday outlining his priorities for the coming year, Trump said illegal immigration was a national crisis and reiterated his vow to build a border wall.

The pound remained on the back foot following a slump overnight. The currency was a shade lower at $1.2930 after brushing $1.2923, its lowest since Jan. 22.

Sterling had lost nearly 0.7 percent on Tuesday on a weak Purchasing Managers’ Index data and uncertainty about Brexit talks.

Australian dollar, yuan slump on bleak China data

The offshore yuan was headed for its worst daily decline in over five months on Friday after weak economic data out of China damaged risk sentiment and weighed on the Australian dollar.

China’s gloomy factory readings have brought global growth worries to the fore again, which is likely to benefit safe-haven currencies such as the Japanese yen.

“February is starting with a slew of weak manufacturing data across China-sensitive parts of Asia… it’s a reminder that the risk rally in emerging market currencies, and generally, is built on wobbly foundations,” said Societe Generale strategist Kit Juckes. “I expect a risk averse morning and a data-driven afternoon.”

The Australian dollar, a proxy for China risk, was the main victim, falling half a percent to 0.7237 while the dollar is set to end the week in the red, losing 0.6 percent on the day against a basket of major currencies.

Still, broader risk sentiment remained fairly robust after a top U.S. negotiator reported “substantial progress” in two days of high-level talks on trade with China.

Markets are now focusing on U.S. jobs data later on Friday. Analysts note that any weakness in the labor market and a fall in wage inflation would only reinforce the dovish outlook for the dollar this year.

The dollar is widely expected to weaken this year as the Federal Reserve turns more cautious about rate increases.

“The outlook for U.S. assets remains relatively uncompelling and investors should be shopping for value elsewhere,” said Hans Redeker, global head of currency strategy at Morgan Stanley in London.

“A weak U.S. equity market outlook should keep low-yielders such as the yen and the Swedish crown supported,” he added.

On Wednesday, the U.S. central bank held interest rates steady as expected but discarded pledges of “further gradual increases” in interest rates.

The euro was flat at $1.1446 after having fallen 0.3 percent in the last session. The single currency has not managed to gain despite broader dollar weakness as growth and inflation in the euro zone remain weaker than expected.

Sterling, grappling with uncertainty over a deal to avoid a chaotic British exit from the European Union, was flat at $1.3109. Analysts expect the British pound to remain volatile in the coming weeks.