CURRENCIES: Dollar Rally Pauses As Euro Turns Higher
November 21 2018 - 3:43PM
Dow Jones News
By Anneken Tappe, MarketWatch
A lack of major economic data and few clear drivers left
currency markets on the quieter side on the Wednesday ahead of
Thanksgiving, as major pairs retraced some of the previous day's
moves.
See:Which markets are closed on Thanksgiving?
(http://www.marketwatch.com/story/which-markets-are-closed-on-thanksgiving-2018-11-20)
The ICE U.S. Dollar Index was down 0.2% at 96.694. This followed
Tuesday's rally
(http://www.marketwatch.com/story/dollar-bounces-back-as-major-rivals-slip-2018-11-20),
which coincided with a sharp drop in equity markets. The Dow Jones
Industrial Average and S&P 500 erased all their 2018 gains
(http://www.marketwatch.com/story/dow-futures-tumble-nearly-300-points-nasdaq-poised-to-fall-by-triple-digits-2018-11-20).
But stocks and more risk-sensitive currencies had recovered
somewhat
(http://www.marketwatch.com/story/sp-500-set-to-claw-back-from-worst-start-to-thanksgiving-week-in-nearly-40-years-2018-11-21)
by Wednesday.
Also check out:South African assets rally on risk appetite, but
there are plenty of worries for their future
(http://www.marketwatch.com/story/south-african-assets-rally-on-risk-appetite-but-there-are-plenty-of-worries-for-their-future-2018-11-21)
The dollar's main rival, the euro , was stronger, retracing some
of its losses from the previous day and last buying $1.1393, versus
$1.1370 late Tuesday in New York.
But the drivers for the shared eurozone currency are less clear,
market participants said. The European Commission rejected Italy's
budget proposal for 2019 a second time on Tuesday and began
disciplinary procedures against the European Union's fourth largest
-- and the eurozone's third largest -- economy. Italy's budget
proposal sees spending and the deficit increase beyond a level
deemed feasible by Brussels, leading to a spat over the past weeks
that has weighed on investor sentiment.
Besides Italy, the European Union also criticized the budget
proposals of Belgium, France, Portugal and Slovenia as possible
noncompliant with the Stability and Growth Pact.
Conflicting headlines on Wednesday, including Italian officials
saying
(https://www.bloomberg.com/news/articles/2018-11-21/italian-bonds-rally-as-salvini-seen-open-to-compromise-on-budget),
and then not saying
(https://www.reuters.com/article/us-health-diabetes-insulin-idUSKCN1NQ00B),
that the deficit increase could be up for discussion, left
investors back at square one.
"So, participants in the euro-dollar pair are faced with a
dilemma. On the one hand, the prospects of slower rate hikes from
the Federal Reserve could weigh on the dollar. On the other hand,
there is still no solid reason to be heavily bullish on the euro,
given the situation in Italy and soft economic growth in the
eurozone," said Fawad Razaqzada, market analyst at Forex.com, who
expects the euro to remain rangebound for now.
Trading in the British pound , ever suffering from the
inconclusive drama surrounding Britain's exit from the EU, was
little changed Wednesday, with sterling buying $1.2777.
Another key date for Brexit looms with an EU summit scheduled on
the coming weekend.
(END) Dow Jones Newswires
November 21, 2018 15:28 ET (20:28 GMT)
Copyright (c) 2018 Dow Jones & Company, Inc.