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Commodity-related sectors led European shares lower for a third straight session on Friday while the dollar was poised for a weekly losses as the “Trumpflation trade” lost momentum, Reuters reported.
World stocks have hit record highs, emerging markets have come back in favor and the dollar has climbed to a 14-year peak in recent weeks on the back of expectations that U.S. President Donald Trump’s economic agenda will stoke growth and inflation.
New U.S. Treasury Secretary Steven Mnuchin took the edge off that optimism overnight when he said any policy steps by the Trump administration would probably have only a limited impact this year.
The comments, made in his first televised interviews since taking office last week, suggested much work was still needed on a sweeping tax reform plan that Mnuchin called his main priority and all this knocked the dollar back and it was trading down 0.2% against a basket of other major currencies at 100.82, leaving it slightly down on the week and facing its first weekly loss in three.
Subdued forecasts from European bluechips including BASF and Vivendi and a drop in mining shares following overnight declines in metals prices dragged the benchmark STOXX 600 index down 0.3%.
Gold hit its highest in about 3-1/2 months on a weaker dollar and safe-haven demand. Spot gold was up 0.4% at $1,254.10 per ounce.
Oil prices fell after U.S. crude inventories rose for a seventh week, showing the market is still struggling to ease oversupply despite producers’ efforts to rein in output.
Sterling, on the other hand, slipped from a 2-week high to the dollar on Friday but was still on track for its strongest week since January as concerns about politics in the United States and Europe took investors’ focus off immediate Brexit worries.
Besides the Brexit bill making its way through Britain’s upper house of parliament, a week largely lacking in major domestic political developments and new economic numbers has given the pound some respite.
Sterling may well continue to recover in coming weeks as long as market players focus elsewhere,” said Richard Falkenhall, a strategist with Swedish bank SEB. “While we see good reasons to maintain a negative view on sterling over the medium term, the political uncertainty created by upcoming elections in several euro zone countries this year and the political situation in the US currently seem to overshadow the troubles we believe will be facing the UK economy going forward.
The pound inched down 0.2% against the dollar at $1.2530 by 0906 GMT, having touched a 15-day high of $1.2570 in early trade in London. It was down a quarter of a percent at 84.37 pence per euro.