Dollar pares initial losses on short-covering

Market Review - 15/07/2020 23:40GMT  

Dollar pares initial losses on short-covering

Although the greenback fell across the board on Wednesday on return of risk appetite triggered by optimism over a coronavirus vaccine optimism, dollar later pared intra-day losses in New York due to short-covering.  
  
Reuters reported Moderna Inc's experimental vaccine for COVID-19 showed it was safe and provoked immune responses in all 45 healthy volunteers in an ongoing early-stage study, U.S. researchers reported on Tuesday.   
  
On the data front, Reuters reported the Federal Reserve said on Wednesday manufacturing production increased 7.2% last month. Output at factories advanced by an unrevised 3.8% in May.    Economists polled by Reuters had forecast manufacturing output rising 5.6% in June. Overall industrial production rose 5.4% last month after gaining 1.4% in May.   
  
Versus the Japanese yen, although dollar rebounded to 107.30 at Asian open and showed muted reaction after the Bank of Japan left its interest rates unchanged, renewed selling emerged and intra-day fall accelerated at European open and the pair tumbled to 106.87 on active safe-haven jpy buying on fear over second wave of coronavirus pandemic in the United States as infections rose together with U.S.-Chain tensions. Price then dropped to session lows of 106.67 in New York before recovering to 106.97 on short-covering and then moved sideways.  
  
Reuters reported the Bank of Japan kept monetary policy steady on Wednesday and maintained its view that the economy would gradually emerge from the coronavirus pandemic's devastating blow, signalling a pause after delivering stimulus twice so far this year.    As widely expected, the BOJ left unchanged its short-term interest rate target at -0.1% and a pledge to guide the 10-year government bond yield around 0% by a 8-1 vote.   
  
The single currency continued its recent winning streak and rose to 1.1422 at Asian open and despite retreating to 1.1392 on profit-taking, the pair later rallied to a 4-month high of 1.1451 in New York morning due to improved risk sentiment on coronavirus vaccine optimism before retreating to   
1.1402 on usd's broad-based short-covering.  
  
Although the British pound retreated from 1.2587 in Asian morning to 1.2564, cable found renewed buying and later rose to 1.2626 in European morning on upbeat UK inflation data as well as COVID-19 remedy optimism before retreating to 1.2594. However, the pair then rallied to session highs of 1.2649 in New York morning but only to weaken to 1.2576 on usd's strength.  
  
Reuters reported consumer price inflation increased to 0.6% in June from 0.5% in May, the Office for National Statistics said. The average forecast in a Reuters poll of economists was for the rate to fall to 0.4%.    Core inflation - which excludes typically volatile energy, food, alcohol and tobacco prices - rose to 1.4% from May's 1.2%. Economists had expected the rate to remain unchanged at 1.2%.     
In other news, Reuters reported talks on Britain's future relationship with the European Union will be a major topic of bloc business from September, but until now Britain has shown insufficient realism about what can be achieved, Germany's Europe Minister Michael Roth said.   
  
Data to be released on Thursday :  
  
New Zealand CPI, China house price index, industrial output, retail sales, GDP, Australia employment change, unemployment rate, NAB business confidence, UK claimant count, ILO unemployment rate, employment change, average weekly earnings, France CPI (EU norm), CPI, Italy trade balance, EU trade balance, ECB refinancing rate decision, ECB deposit rate decision, Canada ADP employment change, and U.S. initial jobless claims, continued jobless claims, Philadelphia Fed manufacturing index, retail sales ex-autos, retail sales, business inventories, NAHB housing index.