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Forex - Dollar Dips as China PMI Bounce Revives Risk Appetite
© Reuters.
Investing.com -- The dollar is opening the week slightly lower after a bounce in Chinese manufacturing activity encouraged traders to start the new quarter with some cautious optimism.
The British pound, meanwhile, has also recouped some of the losses it suffered at the end of a chaotic week in U.K. politics, although the respite looks set to be brief, given weekend press reports that the country’s parties are tentatively planning for a general election to break the deadlock on Brexit.
At 03:00 AM ET (0800 GMT), the U.S. dollar index, which measures the greenback against a basket of six major currencies, was at 96.688, down some 0.2% from its closing levels on Friday. It dipped after China’s Caixin purchasing managers’ index rose sharply to its highest in eight months, a bounce that took it comfortably past the 50 reading that typically represents unchanged levels of activity.
The bounce hasn’t been uniform. PMI readings in France, Germany and Italy all fell, staying below the 50 level in a blow to hopes for a clearer signal of the economy bottoming out after a weak first quarter.
The euro's reaction was muted, ticking up slightly to $1.1246.
Elsewhere, the Turkish lira slid again after President Recep Tayyip Erdogan’s AK Party appeared to lose municipal elections in all three of the country’s biggest cities. It conceded defeat in the capital Ankara and in Izmir, and was not claiming overall victory in Istanbul, the country’s biggest city, against a backdrop of delays and allegations by AK’s opponents of vote manipulation.
In the U.K., a fresh round of parliamentary votes is due later on alternatives to Prime Minister Theresa May’s EU withdrawal bill, but nothing over the weekend suggested that the House of Commons has found a way to break the current deadlock.
Simon Derrick, chief currency strategist with BNY Mellon in London, said in a weekend note that the two-day drop in sterling on Thursday and Friday had been the biggest since the 2016 referendum. He said there is now the possibility that the opposition Labour Party could table a no-confidence vote in the government with the aim of triggering another general election.
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