Dollar flat in thin summer trade; Pound slips on BoE comments

The dollar was flat in Asian trading on Tuesday as major currencies were struggling for direction in thin summer trade. The greenback was unable to advance beyond 102.65 against the yen yesterday and was stuck around 102.35 yen for much of today’s Asian session. 

The euro was also steady and hovered around 1.1080 dollars for a second day. There was little reaction to mixed German trade data out earlier. German exports rose by a less-than-expected 0.3% in June, but imports rose faster than forecast, by 1.0%, supporting the view that domestic demand in the Eurozone’s largest economy remains robust. 

The pound was more volatile though as it came under pressure from comments by a Bank of England policymaker. Writing in the Financial Times, MPC member Ian McCafferty said “Bank rate can be cut further, closer to zero, and quantitative easing can be stepped up” in response to last week’s monetary easing by the British central bank to stimulate the UK economy following the Brexit shock. 

Sterling fell below 1.30 dollars in Asian session today for the first time in four weeks and was last trading at 1.2971 dollars. It was also weaker against the euro at 0.8537 pounds per euro. Positive retail spending data provided little support to the British currency today. Retail spending rose by 1.9% in the 12 months to July, rebounding from a mere 0.2% growth in June, according to the British Retail Consortium. 

In China, the annual rate of inflation met expectations in July to rise by 1.8%. There were doubts however whether the subdued price pressures would be enough to prompt the People’s Bank of China to cut rates as producer prices fell at the slowest rate in two years. Producer prices were down 1.7% year-on-year in July, beating estimates of a 2.0% drop and up from -2.6% in June. The yuan was steady though in onshore trading today at 6.6617 per dollar. 

The Australian dollar lost some ground against the greenback today after the latest NAB business sentiment survey showed business conditions worsened in July from the previous month. The aussie hit a low of 0.7621 after the data but had rebounded slightly to 0.7641 in late Asian session. 

Meanwhile, the New Zealand dollar continued on a downward trajectory ahead of the RBNZ’s expected rate cut on Thursday. Thekiwi was last trading at 0.7111 versus the greenback. 

In commodities, crude oil prices reversed some of yesterday’s gains on profit taking, with WTI oil futures down almost 1% at just under $45 per barrel. Prices were boosted yesterday on renewed calls for a production freeze and comes ahead of an informal meeting by OPEC members in September. 

Looking ahead to the rest of the day, UK industrial output and trade figures will come in focus in the European session, while in the US session, labour costs and productivity data out of the US will be watched.