Forex Markets: Dollar, Pound Weak on Data and Brexit
FOREX MARKETS – The US dollar was weak on Friday in Asian trading but was still near a two-week high after upbeat US housing data. The pound was near a four-month low, with Brexit fears looming large over traders.
The US dollar index, which gauges the strength of the greenback against a basket of other currencies, traded at 97.640, or 0.4% lower.
Earlier in the day, the dollar showed some strength after the release of weekly jobless claims report. The data showed that the number of people applying for jobless benefits decreased to 212,000 from a week ago.
This suggests that America’s economy still retains its strength in spite of the escalating dispute with China, which is another superpower in terms of economy.
April housing data also moved up more than expected, with housing starts rising 5.7% to 1.235 million units last month.
Meanwhile, reports surfaced and suggested that China sold off its US Treasury holdings at the fastest pace in nearly two years during March.
China’s stockpile of US government notes, bills, and bonds dropped by $67.2 billion. This showed a 5.6% slump, according to reports, highlighting that more aggressive actions could worsen the tense trade negotiation.
Pound Slides on Brexit Fears
The pound traded at $1.2786 and had fallen to 1.1432 against the euro after UK Prime Minister Theresa May told party colleagues that she would set a timetable for her departure next month, regardless of the result of her proposed EU Withdrawal Agreement in the House of Commons.
The vote is scheduled in the first full week of June, but there is still little sign that it will succeed.
Market watchers believe that a “Hard Brexiteer” who is more comfortable with the prospect of leaving the EU without any deal would probably replace May.
According to reports, former Foreign Secretary Boris Johnson had confirmed he would run for the leadership. These reports were among the main drivers of the pound’s slide.
Elsewhere in the forex markets, the Chinese yuan weakened against the dollar after Beijing adopted more aggressive rhetoric. The offshore yuan plummeted to a six-month low of 6.9449, while the official rate jumped above 6.90 for the first since December.
“We can’t see the US has any substantial sincerity in pushing forward the talks,” said an opinion column by state-owned news agency Xinhua. “If the US ignores the will of the Chinese people, then it probably won’t get an effective response from the Chinese side.”
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