Sun, May 22, 2022 @ 23:36 GMT
HomeContributorsFundamental AnalysisDollar Retreats as Investors Take Profits; Euro Rebounds

Dollar Retreats as Investors Take Profits; Euro Rebounds

The dollar pared earlier gains during the European trading hours as investors were engaging in profit-taking, while the euro managed to rebound despite political uncertainty remaining in the background.

The dollar index retreated from the 1 ½-month high of 93.92, falling to 93.45 before the session-end as investors were locking in gains ahead of the nonfarm payrolls report to be released on Friday. Investors though seem to remain confident on the US economic environment and Trump’s tax policy which aims to deliver large tax cuts to businesses.

The pound slipped back to $1.3256 after the HIS Markit/CIPS construction PMI reading fell short of expectations in September and below the 50-threshold that separates expansion from contraction, as concerns over rising interest rates weighed on the construction industry’s activities. The figure dropped to 48.1, a level seen before just after the Brexit vote, instead of edging down to 51.0 as analysts anticipated. This was also 3 points below August’s mark of 51.1.

Meanwhile, the UK Brexit negotiator, David Davis, speaking on the third day of the Conservatives’ annual conference in Manchester, supported a "no deal" prospect on Brexit if any errors in negotiations emerge, while he added that officials were working on all scenarios to ensure talks will not fail.

Although political uncertainty in Spain and Germany continued weighing on the euro, a sizable volume of option expiries helped the common currency to rebound from the six-week low of $1.1695 – touched during the Asian session – to $1.1772. The focus will also turn on the ECB meeting minutes to be released on Thursday.

Against the pound, the euro gained 0.42% on the day, climbing to a fresh near two-week high of £0.8870.

In other currencies, the aussie inched up from a 2 ½-month low of $0.7784 to $0.7821, erasing most of the losses made earlier when the RBA retained its neutral stance on monetary policy and kept interest rates steady at the record low levels of 1.5%.

Today’s bi-weekly dairy auction, which tends to affect the kiwi as New Zealand heavily relies on dairy exports, showed prices declining by 2.4%. Two weeks ago, prices advanced by 0.9%. Kiwi/ dollar fell as the data went public. On the day, the pair was last down by 0.5%, reaching a one-month low of 0.7147 earlier in the day.

In energy markets, oil prices pulled back following remarks by the Russian Energy Minister, Alexander Novak, who said today that there was no immediate need to discuss on additional output cuts as part of the deal between OPEC and non-OPEC members. However, prices managed to found support on comments made by the OPEC General Secretary, Mohammed Barkindo, who said that compliance on supply cuts between OPEC and non-OPEC countries is "extremely high". WTI crude was flat around $50.57 per barrel and Brent was 0.20% up at $56.23 ahead of the weekly API crude oil report later today.

Gold gained 0.20%, climbing to $1,272.80 per ounce.

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