Currencies: Dollar Pulls Back, Sterling Set To Finish Week As Best Performer

The U.S. dollar pulled back from recent gains on Friday, looking to end the week little changed compared with last Friday as unknowns around these familiar factors paralyzed trading: the government shutdown, U.S.-China trade talks and the Federal Reserve meeting next week.

The ICE U.S. Dollar Index DXY, -0.70% was down 0.6% at 96.033. For the week, the gauge was on track for a modest 0.3% drop.

Dollar rivals reaped the benefits of its slide, and the euro EURUSD, +0.8491%  climbed to $1.1383, from $1.1307. The European Central Bank on Thursday acknowledged downside risks in the eurozone economy, while Germany — the biggest economy of the bloc — reportedly downgraded its 2019 gross domestic product growth outlook to 1% from 1.8% in the fall.

The greenback also reversed its move versus the Japanese yen USDJPY, +0.16%  , against which it started the session stronger. One dollar last bought ¥109.61, little changed in negative territory, compared with its session high of ¥109.95.

Meanwhile, the British pound GBPUSD, +0.8190%  clawed back some of its earlier gains, trading at $1.3133, compared with $1.3065 late Thursday.

Earlier strength in sterling followed a report that Northern Ireland’s Democratic Unionist Party agreed to back Prime Minister Theresa May’s alternative Brexit deal, which Parliament will vote on Tuesday. The DUP is negotiating with May’s government over putting a time limit on the so-called Irish backstop, which basically guarantees no customs checks between EU member Ireland and Northern Ireland after Brexit kicks in, according to U.K. newspaper The Sun.

On the week, the pound was the best performer among G-10 currencies, climbing 2%, according to FactSet, and underlining that market expectations for the final Brexit result have moved away from the worst-case hard Brexit scenario.

Elsewhere, China’s central bank said it would inject an additional 250 billion yuan ($37 billion) into its banks in response to changes of bank’s targeted reserve requirement ratios, which were last cut earlier this month, according to a Reuters report. The People’s Bank of China also created a bond swap facility that allows to swap commercial bank perpetual debt for central bank bills. The initiative is set to counteract the risk of a trade war with the U.S., as well as its domestic economic slowdown.

China’s yuan was stronger against the U.S. dollar on Friday, with the buck buying 6.7506 USDCNY, -0.5878%  in Beijing, down 0.6%, and 6.7578 yuan USDCNH, -0.5989%  in the offshore market, also down 0.6%.

Want news about Europe delivered to your inbox? Subscribe to MarketWatch's free Europe Daily newsletter. Sign up here.

RECENT NEWS

Mitigating Risks In The Bond Market: Strategies For Uncertain Times

In today's volatile bond market, characterized by liquidity concerns and rising interest rates, effective risk managemen... Read more

UK High Street Banks Rake In £9.2 Billion In Interest On BoE Reserves: A Closer Look

In the intricate world of finance, where numbers often tell compelling stories, one recent figure stands out: £9.2 bill... Read more

Powell's Pledge: Federal Reserve Chair Signals Prolonged Period Of Higher Rates

Federal Reserve Chair Jerome Powell's recent statements have stirred significant interest in financial markets, particul... Read more

European Funds Body Throws Support Behind French Capital Markets Union: Implications For Brexit-Era Finance

In a significant development for European finance, a European funds body recently threw its support behind the French ca... Read more

Federal Reserve's Rate Decision: Navigating Economic Uncertainty

The recent decision by the Federal Reserve to adjust interest rates has sparked significant interest and speculation amo... Read more

Building Bridges: Strengthening Investor Confidence Through Enhanced Risk Data In Emerging Markets

In the dynamic landscape of emerging markets, investor confidence plays a pivotal role in driving economic growth and pr... Read more