The U.S. dollar was weaker Thursday in a volatile session that was marked by a round of weaker-than-expected economic data that briefly overshadowed optimism over U.S.-China trade talks.
Meanwhile, the euro and British pound grappled with slowing growth and continued drama surrounding Britain’s efforts to exit from the European Union with a new trade agreement.
The ICE U.S. Dollar Index
a measure of the currency against a basket of six major rivals, first flipped in to negative territory during Thursday’s session after retail sales data for December showed an unexpected 1.2% decline, the worst drop in nine years. Excluding cars, retail sales contracted 1.8%. Jobless claims for the week ended Feb. 9 ticked up to 239,000, versus 225,000 expected and the producer-price index for January fell 0.1%, versus an expected 0.1% increase.
The dollar gauge then recovered before flipping back into negative territory once again in the New York afternoon. The index was last down 0.1% at 97.008, still close to its highest level in the year so far. For the week, the index is on track for a 0.4% gain.
Optimism around the U.S. and China getting closing in on a resolution to their trade spat had improved sentiment across financial markets over the week and earlier in the day. However, a Bloomberg report said the two parties were still far apart on reform demands.
Meanwhile, better-than-expected Chinese trade data had eased worries over its economic health. China’s exports rose 9.1% year-over-year in January, compared with an expected contraction of 2.8%, while imports contracted 1.5%, less than the 10% decrease expected. China’s yuan was modestly weaker in Beijing
and slightly stronger in the offshore market
with one dollar buying 6.7722 yuan and 6.7768 yuan, respectively.
Elsewhere on the data front, Germany reported zero quarterly gross domestic product growth in the final three months of 2018, undercutting an already low 0.1% consensus forecast. Year-over-year, GDP grew 0.9% in the fourth quarter. Weakness in the eurozone’s largest economy is weighing on growth forecasts for the currency bloc.
Don’t miss: Gloomy German GDP reading underlines the euro’s problems
Eurozone GDP was in line with expectations for the final quarter of last year, growing 0.2% on the quarter at 1.2% on the year.
Still the euro
extended some earlier gains as the dollar turned lower, last buying $1.1300 up from $1.1263.
In the U.K., Prime Minister Theresa May’s government suffered yet another blow when the British Parliament rejected the premier’s Brexit strategy. The nonbinding vote, which had been aimed to get a re-endorsement of the prime minister’s plan to secure changes to her initial Brexit deal, highlighted once again that U.K. lawmakers are not standing united. Britain is set to leave the European Union on March 29.
“With only 1½ months until the official divorce date, approving amendments which include extending Article 50, like the one proposed by Cooper on Jan. 29, could ease somewhat fears that the U.K. will crash out of the EU,” wrote Charalambos Pissouros, senior market analyst at JDF Brokers. Against that backdrop the pound could see a modest rebound, he said.
The British pound
didn’t react strongly to the vote, holding its losses at $1.2800, near its lowest level in a month, compared with $1.2844 late Wednesday in New York. The euro-sterling pair
was meanwhile stronger, with one euro buying £0.8826, up 0.7%.
Other major currency crosses were rather muted, but the New Zealand dollar
continued its push higher at $0.6840, up 0.7%. The New Zealand dollar shot sharply higher against its U.S. rival on Wednesday after the Reserve Bank of New Zealand confirmed that the next move for interest rates was more likely up than down.
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