Dollar falls as Fed officials ring note of caution, pound bounces

The dollar fell broadly on Friday in the wake of cautious comments from two U.S. Federal Reserve officials about global economic growth, while sterling rose following losses tied to fears about a Brexit deal.

The greenback fell to one-week lows versus the euro and a two-week trough against the yen following comments from Fed Vice Chair Richard Clarida, who told CNBC television he saw some evidence that global growth was cooling.

Clarida also noted key U.S. short-term borrowing rates are close to neutral and said being at neutral “makes sense.”

Traders perceived his comments to mean the No. 2 Fed official may be open for the Fed to pause its rate-hike campaign sooner than previously thought.

“You have seen a dovish tilt from some Fed officials. That put pressure on the dollar,” said Chuck Tomes, senior investment analyst at Manulife Asset Management in Boston.

Separately, Dallas Federal Reserve President Robert Kaplan said on Fox Business that global growth will be a bit of a headwind, which may spread to the United States.

Clarida and Kaplan's remarks spurred selling in the dollar, which fell 0.7 percent against the euro EUR=EBS at $1.141.

Against the yen, the greenback JPY=EBS was down 0.7 percent at 112.82 yen.

Chicago Fed President Charles Evans acknowledged some economic risks ahead but he also raised the probability the Fed could raise rates above what would be neutral if U.S. data come in stronger than forecast.

The dollar also weakened against sterling, reversing some of Thursday’s gains.

The pound briefly recovered against the euro following its worst day versus the single currency in about 25 months, as U.K. Prime Minister Theresa May clinched backing from some key Brexit supporters with her draft plan for Britain to leave the European Union in March.

A string of cabinet ministers quit on Thursday in protest over the terms in May’s Brexit proposal. The resignations sent the pound reeling.

Sterling GBP=D3 was last up 0.42 percent versus the dollar at $1.2829 but was down 0.31 percent versus the euro EURGBP=D3 at 88.945 pence.

The euro was also bolstered by hopes that Italian Prime Minister Giuseppe Conte was looking to work with the EU over his government’s 2019 budget, which has been rejected by Brussels.

Meanwhile, currency traders are monitoring signs that Washington and Beijing are seeking to de-escalate their trade dispute.

U.S. President Trump said he might not impose more tariffs on Chinese imports if China comes up with terms that he and Beijing could agree on.

The yuan in offshore trading CNH=EBS edged up 0.13 at 6.92 per dollar.

Euro Set For Biggest Drop In 4 Months

The euro was on track for its greatest week by week drop in four months as information demonstrated a monetary stoppage in Europe was spreading, pulling government security yields lower.

The euro merged at a fourteen day low in quelled exchanging. A few traders said huge purchase arranges around $1.13 offered help.

With China out for occasions this week, advertise unpredictability has fallen. Speculators have checked out the opening a long time of the year, and the vast majority of the accord exchanges toward the finish of 2018 acquired misfortunes.

Going into 2019, the dollar was relied upon to debilitate, particularly against the euro and the yen. Be that as it may, up until now, it has increased in excess of a percent against the euro and been level against the Japanese money.

The European Commission cut its development and swelling conjectures on Thursday, as drawback astonishments to German and Spanish modern requests fuelled stresses over a quickening log jam. That information has burdened security markets; centre government security yields in Europe are at their most minimal in more than two years. Benchmark German yields are only 10 premise focuses far from zero percent.

Mystery Buyer
Notwithstanding the powerless information, brokers were reluctant to move the euro forcefully beneath $1.13. Subsequent to hitting a low of $1.1323 on Thursday, the euro finished the day at $1.1338. It was stuck around that dimension on Friday. [...full story...]