* Graphic: World FX rates in 2019 http://tmsnrt.rs/2egbfVh
(Recasts throughout)
By Kate Duguid
NEW YORK, Aug 16 (Reuters) - The dollar ended roughly flat
on Friday, retracing the morning's move higher, after worries
tied to trade tensions and a Federal Reserve rate cut weighed on
consumer sentiment and a report that Germany may run a deficit
to boost growth lifted the euro.
Germany's right-left coalition government would be prepared
to ditch its balanced budget rule and take on new debt to
counter a possible recession, Der Spiegel magazine reported on
Friday. The news lifted the euro against the dollar, but the
single currency nevertheless remained 0.14% lower on the day at
$1.1091. "EUR-USD reversed from over two-week lows to highs of
$1.1106 at mid-morning. The move higher came as reports
circulated that Germany may shift to deficit fiscal spending
should Germany head into recession," wrote analysts at Action
Economics.
"The FX market is geared up for further easing (from the
European Central Bank) in September, though more talk like this
will keep ongoing pressure on EUR-USD."
Earlier Friday, the euro fell to a two-week low of $1.1067
EUR= , shy of the two-year low of $1.1025 it reached on Aug. 1.
Friday morning's fall was caused by growing expectations of an
interest rate cut by the European Central Bank after Governing
Council member Olli Rehn suggested on Thursday the central bank
could restart its quantitative easing program and was open to
extending it into equity purchases.
"Global markets started Friday in a better mood with
sentiment boosted by expectations for the European Central Bank
to err on the side of bold stimulus as soon as central bankers'
coming meeting on Sept. 12," said Joe Manimbo, senior market
analyst at Western Union Business Solutions.
Also pulling the dollar lower was the University of Michigan
consumer sentiment index which fell to 92.1 early this month,
the lowest reading since January, from 98.4 in July. The
survey's current conditions measure dropped to its lowest level
since late 2016. The consumer sentiment data came after the Treasury yield
curve inverted this week, which historically has preceded U.S.
recessions. The inversion stoked worries about the impact of the
Sino-U.S. trade war. The curve was slightly steeper on Friday at
6.1 basis points US2US10=TWEB .
Measured against a basket of six other major currencies, the
dollar .DXY was higher by 0.05% at 98.197. It has recovered
by 1.20% from its three-week low on Aug. 9.
Strong correlation between oil price and Norwegian crown since
June https://tmsnrt.rs/2NdQYj0
^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>