Dollar holds onto gains, but sentiment remains fragile

Friday,   16-Aug-2019   09:09 AM (IST)

The dollar held onto gains on Friday after a surge in U.S. retail sales eased concerns about the world's top economy, but traders cautioned against reading too much into one piece of data given the growing risks to the outlook. The greenback was on course for a weekly gain against safe-haven currencies such as the Japanese yen and the Swiss franc, pointing to some respite for frayed nerves after fears of recession and protests in Hong Kong rattled financial markets. Data showing American consumers continued to splurge in July came as a relief to investors after the U.S. bond market sounded alarms of a recession. Yet, the fragile calm in markets is unlikely to last, traders said. This week's inversion in the U.S. Treasury yield curve, which has historically preceded several past U.S. recessions, has stoked fresh worries about the economic impact of the Sino-U.S. trade war. China on Thursday vowed to counter the latest U.S. tariffs on $300 billion of Chinese goods, but U.S. President Donald Trump said any pact would have to be on America's terms, suggesting a resolution to the trade war remains elusive. Trump, who is seeking re-election in 2020 and had made the economy and his tough stance on China a key part of his 2016 campaign for the White House, said any agreement must meet U.S. demands. More protests are also expected in Hong Kong over the weekend, which could become a new geopolitical flashpoint and further complicate the U.S.-China trade war. Sterling was marginally higher, on course for its first weekly gain since mid-July, as positive data on retail sales and consumer pries showed the British economy is in better shape than some investors had feared. The pound traded at $1.2111, close to a one-week high of $1.2150. However, sterling bears are still on the ascendancy given the risk that Prime Minister Boris Johnson will take Britain out of the European Union without transitional trade agreements, potentially causing short-term economic turmoil.