Euro up on Ger­man IFO, dol­lar slips on suc­cess­ful US-China phone call

The Pak Banker - - MARKETS / SPORTS -

The euro rose nearly 0.5% on Tues­day on bet­terthan-ex­pected Ger­man eco­nomic data, while the U.S. dol­lar fell af­ter the United States and China both hailed a phone call be­tween their se­nior trade of­fi­cials as a suc­cess.

Ger­man busi­ness morale im­proved more than ex­pected in Au­gust as both man­u­fac­tur­ing and ser­vices picked up steam, a sur­vey showed, boost­ing hopes that Europe's largest econ­omy is set for a strong re­cov­ery fol­low­ing the mas­sive coro­n­avirus shock.

Kit Juckes, macro strate­gist at So­ci­ete Gen­erale, said Ger­many's IFO Busi­ness Cli­mate in­dex was "just an­other data point that helps keep the euro at this stretched level," adding that "U.S. con­fi­dence and home sales data are un­likely to elicit any re­sponse at all."

The euro was last up 0.4% at $1.1831, hav­ing risen as high as $1.1842 ear­lier. The trade-sen­si­tive Aus­tralian dol­lar and

Chi­nese yuan rose against the U.S. cur­rency, reaf­firm­ing in­vestors' faith that even as diplo­matic ties be­tween the two coun­tries fray, the trade re­la­tion­ship can en­dure.

On the call, which had been orig­i­nally sched­uled for Aug. 15, U.S. Trade Rep­re­sen­ta­tive Robert Lighthizer and Trea­sury Sec­re­tary Steven Mnuchin spoke with Chi­nese Vice Premier Liu He.

The United States said both sides "see progress" and China's com­merce min­istry called the talks "con­struc­tive." The news lifted the Aus­tralian dol­lar 0.2% to $0.7173 and nudged the Chi­nese yuan firmer to 6.9070.

The green­back also inched lower ver­sus the Bri­tish pound to stand down 0.4% at $1.3119. The U.S. dol­lar was only up ver­sus the Ja­panese yen, last trad­ing at 106.34, 0.3% stronger.

Against a bas­ket of cur­ren­cies the dol­lar dipped 0.2% to 93.03. It has stead­ied this month af­ter a roughly 10% slide from late March through to early Au­gust.

Sen­ti­ment, and sup­port for riskier cur­ren­cies over the dol­lar, was also boosted by a Fi­nan­cial Times re­port which said that U.S. au­thor­i­ties were con­sid­er­ing fast­track­ing ap­proval for a COVID-19 vac­cine be­ing de­vel­oped by As­traZeneca and Ox­ford Uni­ver­sity.

Stocks moved fur­ther into record ter­ri­tory but FX moves were con­tained with mar­kets al­ready look­ing ahead to a speech from FED Chair­man Jerome Pow­ell later in the week, which could shift the U.S. dol­lar in ei­ther di­rec­tion.

In­vestors ex­pect him to strike a dovish tone at the Jack­son Hole Sym­po­sium and maybe ad­dress spec­u­la­tion that the cen­tral bank could adopt a more ac­com­moda­tive stance on in­fla­tion.

"The po­ten­tial dovish shift in Fed pol­icy should be well priced in by now which should limit fur­ther down­side po­ten­tial for the U.S. dol­lar," said Lee Hard­man, cur­rency an­a­lyst at MUFG. Low U.S. yields, mir­ror­ing ex­pec­ta­tions that the Fed is will­ing to ac­cept in­fla­tion over­shoot­ing its tar­get, have been weigh­ing on the dol­lar.

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