Market Review - 21/05/2020 23:41GMT
Dollar ends marginally higher on safe-haven buying due to US-China trade tension
The greenback went through a roller-coaster ride and ended the day marginally higher against its peers on Thursday as risk sentiment faded together with renewed US-China trade tension following a series of China-bashing tweets from U.S. President Donald Trump.
Reuters reported diplomatic relations between the world's two biggest economies have soured in recent weeks with U.S. President Donald Trump attacking China's handling of the coronavirus outbreak. The latest salvo came when Trump took to Twitter late on Wednesday to accuse China of a "massive disinformation campaign" seeking to damage his re-election chances, "so they can continue to rip-off the United States." And millions more Americans filed for unemployment benefits last week as backlogs continue to be cleared and disruptions from the novel coronavirus unleash a second wave of layoffs, pointing to another month of staggering job losses in May.
Initial claims for state unemployment benefits totaled a seasonally adjusted 2.438 million for the week ended May 16, the Labor Department said on Thursday. Data for the prior week was revised down to show 2.687 million claims filed instead of the previously reported 2.981 million. Connecticut said last week it had misreported its numbers. Economists polled by Reuters had forecast claims would total 2.4 million in the latest week.
Versus the Japanese yen, dollar rebounded strongly to 107.75 in Asian morning before retreating to 107.60 in Asia. However, the pair found renewed buying there and gained to session highs at 107.84 in early European morning on usd's broad-based strength following a series of China-bashing tweets from U.S. President Donald Trump. Price then retreated again to 107.64 at New York open and then to 107.55 on soft U.S. initial jobless claims data before moving broadly sideways.
The single currency met renewed selling at 1.0988 at Asian open and retreated to 1.0953 ahead of European open on usd's strength following Trump's China-bashing tweets. However, the pair then rose to a near 3-week peak at 1.1008 at New York open on upbeat euro zone PMI data before tumbling to 1.0938 in New York morning due partly to cross-selling of euro. Price then recovered to 1.0968 and then moved narrowly.
Reuters reported the devastating impact of the coronavirus on the euro zone economy abated a little this month as some government-imposed lockdown measures introduced to contain the spread of the virus were eased, a survey showed. There was an improvement in the battered services sector, which has borne the brunt of lockdown measures. The flash PMI for the bloc's dominant service industry rose to 28.7 from 12.0, exceeding expectations in a Reuters poll for 25.0.
Meanwhile, a manufacturing PMI rose to 39.5 from 33.4, beating expectations for 38.0. An index measuring output almost doubled to 35.4 from 18.1.
The British pound dropped from 1.2248 in Australia to 1.2193 in Asia, then lower to session lows at 1.2186 ahead of European open on usd's broad-based strength. However, the pair erased its losses and rallied in European morning on the release of slightly better-than-expected UK PMIs and gained to 1.2249 in New York morning before retreating in tandem with euro to 1.2209 and then moved broadly sideways.
Reuters reported Britain's economy flattened out a bit this month from its nosedive in April caused by the coronavirus lockdown, but it remains in the grip of a severe contraction, a business survey showed on Thursday. An index measuring activity in the dominant services sector and in manufacturing rose to 28.9 in May's preliminary purchasing managers' index from 13.8 in April's final reading. IHS Markit said the "flash" May reading for the services sector rose to 27.8 from 13.4 in April while the manufacturing sector PMI increased to 40.6 from 32.6.
In other news, Reuters reported New York Federal Reserve Bank President John Williams said negative rates would have adverse consequences for the U.S. economy and he does not view it as a tool the central bank should be using now. Williams also said the Fed is not going to raise interest rates any time soon until it is confident the economy is back on track to meet the central bank's full employment and price stability goals.
Data to be released on Friday:
New Zealand retail sales, Japan CPI core nationwide, UK PSNB, PSNCR, retail sales, retail sales ex-fuel, France Markit manufacturing PMI, Markit services PMI, Germany Markit manufacturing PMI, Markit services PMI, EU Markit manufacturing PMI, Markit services PMI and Canada retail sales
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