Dollar pares initial losses and ends higher on upbeat U.S. data

Market Review - 17/01/2020  00:00GMT  

Dollar pares initial losses and ends higher on upbeat U.S. data

The greenback pared its initial losses and gained in New York session to end the day higher against majority of its peers after the release of upbeat U.S. data together with a rise in U.S. stocks.  
  
Reuters reported U.S. retail sales rose for a third straight month in December, with households buying a range of goods even as they cut back on purchases of motor vehicles, which could strengthen the view that the economy maintained a moderate growth pace at the end of 2019.    The Commerce Department said on Thursday retail sales increased 0.3% last month. Data for November was revised up to show retail sales gaining 0.3% instead of rising 0.2% as previously reported.  Economists polled by Reuters had forecast retail sales would gain 0.3% in December. Compared to December last year, retail sales accelerated 5.8%.  Excluding automobiles, gasoline, building materials and food services, retail sales jumped 0.5% last month after falling by a downwardly revised 0.1% in November.  
  
Versus the Japanese yen, dollar jumped at Asian open to 109.98 and continued to trade with a firm bias in Asian session. Price then rose to 110.06 in European morning on broad-based selling in jpy. However, the pair then pared its gains and retreated to 109.94 at New York open due to profit-taking and then rallied to session highs at 110.18 on upbeat U.S. retail sales data.  
  
The single currency met selling interest at 1.1157 at Asian open and dropped to 1.1145 ahead of European open. However, price then rose to an 8-day high at 1.1172 ahead of New York open but only to tumble to an intra-day low of 1.1129 on renewed usd's strength after upbeat U.S. data before moving sideways.  
  
The British pound jumped up to 1.3057 in Australia due partly to cross-buying of sterling especially vs euro before meeting selling interest at 1.3052 in Asia and dropped briefly to session lows at 1.3026 in early European morning. However, cable swiftly erased its losses and rallied to 1.3074 ahead of New York open before retreating to 1.3033 in New York morning on usd's strength post release of U.S. data. Later, the pair gained to an intra-day high of 1.3083 on short-covering from its recent losses and then swung broadly sideways.  
  
In other news, Reuters reported European Central Bank policymakers took a more upbeat view on economic developments in their December 12 meeting but continued to see an abundance of risk that warrant ultra-easy policies, the accounts of the meeting showed on Thursday.   The bank left policy unchanged in Christine Lagarde's first meeting as the bank's president but noted that political risk may be ebbing, inflation pressures seem to be building and the bloc's vast manufacturing sector was showing signs of bottoming out, all suggesting that the worst of the recent slowdown by be over.  
  
The ECB has kept money taps wide open for years, trying to boost growth and inflation as the bloc is still working to overcome the lingering effects of a debt crisis that started nearly a decade ago and came close to tearing apart the currency union.   "Incoming data since the last monetary policy meeting pointed to continued weak but stabilising euro area growth dynamics," the accounts of the meeting quoted ECB chief economist Philip Lane as saying. "Measures of underlying inflation remain generally subdued, although there were some indications of a mild increase."  
  
The 13 page document however made only a brief mention of the ECB's upcoming policy review, a one-year deep dive that is likely to set course for the bank over much of the next decade and dominates investors' interest.  "It was also suggested that some broad guidance be communicated about the forthcoming strategy review, including the likely timeline, although it was generally seen as advisable to refrain from public discussion on the strategy prior to the envisaged launch of the review," the ECB said.  
  
On the data front, Reuters reported U.S. import prices increased in December, leading to the first year-on-year increase in nine months, but the underlying trend remained weak, consistent with subdued imported inflation.   The Labor Department said on Thursday import prices rose 0.3% last month, lifted by gains in the costs of petroleum products. Data for November was revised down to show import prices edging up 0.1% instead of gaining 0.2% as previously reported. Import prices exclude tariffs.    Economists polled by Reuters had forecast import prices would rise 0.3% in December.  
  
Data to be released on Friday:  
  
Australia manufacturing PMI, China industrial output, retail sales, GDP, Japan tertiary industry index, Swiss producer/import price, France budget balance, Italy trade balance, global trade balance, CPI, CPI (EU norm), EU current account, construction output, HICP, HICP core, UK retail sales, retail sales ex-fuel and U.S. building permit, housing starts, industrial production, capacity utilization, manufacturing output, JOLTS job openings, University of Michigan sentiment.