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Dollar off earlier highs on Ukraine concerns

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Shutterstock photo - - Soft German factory orders and news Italy is back in recession bolstered the dollar over the euro earlier Wednesday, though concerns the Russia-Ukraine conflict may escalate sent the greenback back into negative territory against most major currencies later in the session.

In U.S. trading on Wednesday, EUR/USD was up 0.04% at 1.3381.

Italy's economy shrank for a second consecutive quarter in the three months to June, which technically means the country is in recession.

ISTAT, Italy's statistical office, reported that the country's gross domestic product contracted by 0.2% in the second quarter, confounding expectations for growth of 0.2%.

Italy's economy shrank 0.1% in the preceding quarter.

Annualized GDP declined at a rate of 0.3%, worse than expectations for an increase of 0.1%.

Soft German factory data took its toll on the single currency as well.

In a report, Bundesministerium für Wirtschaft und Technologie said that German factory orders fell -3.2% in July.

Analysts had expected German factory orders to rise 1.0% last month.

The European Central Bank will release its latest decision on interest rates on Thursday, and concerns monetary authorities will loosen policy to steer the euro area away from deflationary decline softened the euro against the greenback before investors sold the dollar for profits.

The dollar fell later in the session on concerns an escalating Russia-Ukraine conflict will weigh on the global economy, which sent investors to gold, a safe-haven asset that trades inversely with the greenback.

Reports that Russia continues to amass troops along its border with Ukraine in wake of a U.S.-European decision to slap sanctions on Moscow for allegedly backing separatists frayed nerves due to fears the conflict will weigh on global growth.

Back in the U.S., official data revealed that the country's trade deficit narrowed unexpectedly to a five-month low of $41.54 billion in June from $44.66 billion in May.

Analysts were expecting a $44.70 billion trade gap.

The dollar was down against the yen, with USD/JPY down 0.54% at 102.04, and down against the Swiss franc, with USD/CHF down 0.18% at 0.9075.

The greenback was up against the pound, with GBP/USD down 0.22% at 1.6849.

Manufacturing production in the U.K. rose less than expected in June, while industrial output also came in below forecasts, official data showed on Wednesday.

In a report, the U.K. Office for National Statistics said that manufacturing production inched up by 0.3% in June, disappointing expectations for a gain of 0.6%.

On an annualized basis, manufacturing production rose at rate of 1.9% in June, below forecasts for a 2.1% increase.

The report also showed that industrial production rose by 0.3% in June, missing expectations for a 0.6% gain.

The Bank of England is to release its latest decision on interest rates and monetary policy on Thursday, and Wednesday's lackluster data prompted investors to avoid the pound ahead of time.

While the BoE is seen tightening policy ahead of other major central banks, uncertainty as to when weakened the pound on Wednesday.

The dollar was down against its cousins in Canada, Australia and New Zealand, with USD/CAD down 0.41% at 1.0916, AUD/USD up 0.54% at 0.9354 and NZD/USD up 0.12% at 0.8478.

The US Dollar Index, which tracks the performance of the greenback versus a basket of six other major currencies, was down 0.14% at 81.48.

On Thursday, both the European Central Bank and the Bank of England are to announce their decisions on interest rates and monetary policy, which could move the dollar.

Elsewhere, the U.S. is to publish the weekly report on initial jobless claims. offers an extensive set of professional tools for the financial markets.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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