FX Update: The dollar lost ground to the yen and pound
FX Update: The dollar lost ground to the yen and pound, while consolidating gains seen on Friday against the euro and Canadian dollar, among other currencies. The narrow trade-weighted USD index (DXY) was little changed heading into the New York interbank open after rallying nearly 0.5% on Friday. The yen picked up a safe haven bid as European stock markets corrected after rallying on Friday in the wake of the U.S. jobs report, with uncertainty remaining about whether the U.S. and China can finally reach a deal on the limited "phase 1" trade deal, two months after being announced and with only six days until the U.S. is scheduled to hike tariffs on a further $160 B of Chinese goods. Chinese trade data also revealed a sub-forecast 1.1% contraction in exports in November, though Japan's second release Q3 GDP report brought an unexpected upward revision, to 1.8% y/y growth. The pound rallied to new highs as two new polls showed the Conservative party extending its lead over Labour. Cable rallied a fresh eight-month high at 1.3181, while EUR-GBP dropped to a 31-month low, at 0.8393. Elsewhere, EUR-USD settled around 1.1050-60, after dropping on Friday from levels above 1.1100. Friday forecast-smashing U.S. November employment report saw the 10-year U.S. T-note over Bund yield differential rise by around 3 bp, to about 213 bps. Out of the Eurozone, German trade data today showed a better-than-expected 1.2% rise in German exports in October data, though this has had little impact on the euro.