New York: The dollar was on track to end the week essentially unchanged after gaining Friday as US first-quarter economic growth was revised higher, potentially soothing Federal Reserve concerns over “transitory weakness.”
The greenback was up less than 0.1 percent for both the day and week, reversing overnight losses sustained as markets turned somewhat risk-averse ahead of long holiday weekends in both the UK and the US. Dollar gains were paced by a sharp drop in the pound, offset by losses versus the yen as stale yen shorts were unwound.
The pound fell to a one-month low against the dollar at 1.2788 and dropped more than 1 percent against 7 of its G-10 peers after an opinion poll showed the ruling Tory party with just a 5 percent lead over Labour as the country heads toward a June 8 general election. A little more than two weeks ago, the Tory lead was about 20 percent in the vote called by Prime Minister May as a step to strengthen her hand before Brexit negotiations with Europe get underway next month.
A Labour victory, once unthinkable, could lead to political chaos and a further steep drop in the pound, one London-based trader said. Demand has picked up for GBP downside protection as the June election approaches, traders in Europe said.
The dollar rose after data showed Q1 GDP expanded at a 1.2 percent annual rate, surpassing estimates for a rise to 0.9 percent from the previous estimate of 0.7 percent; other data showed a smaller-than-expected drop in US durable goods orders that followed a strong upward revision to the prior month report, perhaps also a comfort to the Fed
EUR/USD fell to a fresh low for the week at 1.1161 before finding a base close to Monday’s low at 1.1162; stop-loss sell orders are expected on a break below 1.1150, a trader in Asia said; larger stops are positioned below 1.1080, a trader in London said
USD/JPY climbed above 111.00 in US trading, lifting off the session low at 110.88 seen as US trading got underway; JPY saw haven-related demand and unwinding of JPY shorts beginning in the Asian session, though outside of GBP selling, there was no other obvious catalyst for the yen demand, traders said.
Elsewhere, the Canadian dollar pared losses from Thursday as crude oil steadied after a steep slide that followed the OPEC decision to extend output curbs until March 2018.
