By Peter Nurse
Investing.com - The dollar edged higher in early European trade Friday, in tight ranges as traders digest a potential rift between U.S. Treasury Secretary Steven Mnuchin and the Federal Reserve.
At 3 AM ET (0800 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, was up 0.1% at 92.325, just above the month’s low of 92.129. The dollar has lost ground against riskier currencies for over a week as drug manufacturers continue to report progress towards a Covid-19 vaccine.
EUR/USD dropped 0.1% to 1.1870, USD/JPY rose 0.1% to 103.86, while the risk sensitive AUD/USD fell 0.1% to 0.7286.
The dollar has had a couple of competing influences overnight, resulting in traders taking a cautious stance.
U.S. Treasury Secretary Steven Mnuchin called an end to some of the Federal Reserve's pandemic lending, as he asked for $455 billion allocated to the Treasury under the CARES Act to be re-appropriated for other spending. The central bank openly disagreed with the move.
This was the first sign of a rift between these two essential bodies and sparked concern from some investors who had counted on central bank support, helping the safe-haven dollar.
This move overturned the earlier weakness in the greenback after earlier reports that U.S. Senate Republican and Democrat leaders had agreed to resume negotiations on another coronavirus stimulus package.
Weekly initial claims numbers had risen on Thursday for the first time in five weeks as the restrictions caused by the surge in Covid-19 cases halted the recovery in the employment market.
California ordered a curfew placed on all indoor social gatherings and non-essential outside activities, while the country’s top public health agency pleaded with Americans not to travel for Thanksgiving.
Elsewhere, GBP/USD rose 0.1% to 1.3270 after U.K. retail sales rose 1.2% in October, and were 5.8% higher than a year earlier, bucking forecasts for growth to slow to 4.2% as consumers started their Christmas shopping early.
However, news about a potential trade deal between the U.K. and the European Union continues to be the main driver for sterling, meaning moves on economic data tend to be limited.
“Some EU countries have reportedly urged the European Commission to report its no-deal Brexit plans, which are adding some doubts about the effective state of any advances in the negotiations,” said analysts at ING, in a research note. “These days will be crucial for Brexit, and we might expect a large move in GBP at any time now.”