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Dollar dips as EU migration deal boosts euro

Dollar dips as EU migration deal boosts euroNEW YORK: The dollar slipped to a three-day low against the euro on Friday after European Union leaders reached an agreement on migration that eased pressure on German Chancellor Angela Merkel, but the currency was set to log its best quarterly performance in six quarters.

European Union leaders on Friday claimed success in reaching a hard-fought agreement to control immigration even though it faced instant criticism as vague, hard to implement and a potential threat to human rights.

“EU accord is helping to boost sentiment in the euro area,” said Karl Schamotta, director of global product and market strategy, at Cambridge Global Payments in Toronto.

The deal to share out refugees on a voluntary basis and create “controlled centres” to process asylum requests has thrown a lifeline to Chancellor Merkel, whose coalition government has been teetering on the brink of collapse.

“The agreement probably means no further worries about her coalition falling apart. It’s therefore positive for the euro,” Marshall Gittler, chief strategist at ACLS Global, said in a note.

The euro was up 0.83 percent against the dollar at $1.1663.

The dollar index, which measures the greenback against a basket of six currencies, was down 0.76 percent at 94.663.

Schamotta also pointed to a rally in the British pound to a two-day high after a better-than-expected revision to Britain’s first-quarter economic growth raised hopes of monetary policy tightening in the coming months, as pressuring the greenback.

Data on Friday showed consumer spending, which accounts for more than two-thirds of US economic activity, rose 0.2 percent in May. Data for April was revised down to show spending rising 0.5 percent instead of the previously reported 0.6 percent jump.

“That suggests that perhaps consumers are not as positive about the future as had been hoped,” said Schamotta.

“One data point does not make a trend, but that damping of consumer spirits is something that market participants are quite concerned about,” he said.

Still, the dollar index was on pace to finish the quarter up more than 5 percent, supported mainly by diverging monetary policy – the idea that the US Federal Reserve is going to normalize policy more quickly than other major central banks.

The Mexican peso hit a one-month high against the US dollar, ahead of Mexico’s presidential election on Sunday.

The Canadian dollar strengthened to a 10-day high against its US counterpart after a surprise expansion of the domestic economy in April raised expectations for a Bank of Canada interest rate hike next month.

China’s yuan logged its biggest monthly fall on record, as investors grappled with worries that a bitter Sino-US trade row could rattle the world’s second-biggest economy.

Copyright Reuters, 2018

Source: Brecorder

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