Dollar pares losses after U.S. and China reache phase one trade deal

Market Review - 14/12/2019  04:31GMT  

Dollar pares losses after U.S. and China reache phase one trade deal, sterling rises on Conservative Party's landslide election win before retreating on profit taking

The greenback pared intra-day losses made in Asia and Europe and ended mixed on Friday after United States and China has agreed on the phase one trade deal as well as slashing American tariffs on Chinese goods. Sterling rallied across the board in Australia after UK Conservative Party's projected majority election win but later pared its gains on profit-taking.  
  
Reuters reported U.S. President Donald Trump and Chinese officials said Friday that they have agreed to a "phase one" trade deal that included cutting U.S. tariffs on Chinese goods.   But they offered no specific details on the amount of U.S. agricultural goods Beijing had agreed to buy, a key sticking point of the lengthy deal negotiations.   Officials in China have "agreed to many structural changes and massive purchases of Agricultural Product, Energy, and Manufactured Goods, plus much more," he said. The U.S. has agreed to suspend tariffs on $160 billion in Chinese goods due to go into effect on Dec. 15, Trump said, and cut existing tariffs to 7.5%.  The U.S. has been pushing for Beijing to commit to buy $50 billion in agricultural products in 2020, a figure that Chinese officials have previously balked at.   Asked specifically about the $50 billion figure, officials in Beijing said details on value will be disclosed later.   
  
Versus the Japanese yen, despite a brief but sharp drop to 108.94 in Australia, dollar jumped to 109.57 on positive U.S.-China trade news, the pair then ratcheted higher to +a 10-day high at 109.70+ in Europe on cross-selling in jpy. However, price met renewed selling and fell to 109.26 in New York morning after U.S. President Trump's tweet before rebounding to 109.62 after the United States and China has confirmed phase one trade deal was reached but only to fall again to 109.21 as traders cited lack of details on the amount of U.S. agricultural goods Beijing had agreed to buy together with selloff in U.S. Treasury yields.   
  
Reuters reported the United States has agreed to reduce some tariffs on Chinese goods and delay a tranche of tariffs that were slated to go into effect on Dec. 15 as part of a trade deal between the two economic giants, a U.S. source familiar with the situation said on Thursday.   China also has agreed to make $50 billion in agricultural purchases in 2020 as part of the deal, that person and another U.S. source familiar with the talks said.     
U.S. President Trump tweeted "The Wall Street Journal story on the China Deal is completely wrong, especially their statement on Tariffs. Fake News. They should find a better leaker!"   
  
The single currency initially jumped in tandem with sterling to a 4-month high at 1.1199 in Australia before retreating to 1.1164 at European open. However, price then rebounded to 1.1185 but only to drop to session lows at 1.1118 in New York afternoon on active selling in eur/jpy and eur/chf cross.   
  
The British pound went through a volatile session. Although cabled rallied in Australia to a 1-1/2 year high at 1.3516 on projected majority win for UK Prime Minister Boris Johnson's Conservative Party suggesting that an orderly Brexit deal will be made, price retreated to 1.3432 before rebounding to 1.3507 in Asian morning. However, the pair then dropped to 1.3358 in Europe and then later to 1.3306 in New York on profit-taking as well as cross-selling in sterling.   
  
Reuters reported British Prime Minister Boris Johnson said things seemed to be going in the right direction when he arrived to hear the result of his own electoral vote in the west London seat of Uxbridge, an ITV reporter said.   Johnson's Conservative Party is on course for a resounding victory in Britain's election, according to the exit poll.   Eeuters then reported British Prime Minister Boris Johnson's Conservatives have won an outright majority in parliament, according to a tally of seats won so far by broadcaster ITV.   The official exit poll projected the Conservatives would win a total of 368 seats. With 595 or parliament's 650 seats declared, the Conservatives have won 326, ITV said.   
  
On the data front, Reuters reported U.S. retail sales increased less than expected in November as Americans cut back on discretionary spending, which could see economists dialing back economic growth forecasts for the fourth quarter.   The Commerce Department said on Friday retail sales rose 0.2% last month. Data for October was revised up to show retail sales increasing 0.4% instead of gaining 0.3% as previously reported.   Economists polled by Reuters had forecast retail sales would accelerate 0.5% in November. Compared to November last year, retail sales increased 3.3%.   Excluding automobiles, gasoline, building materials and food services, retail sales edged up 0.1% last month after rising by an unrevised 0.3% in October.   
  
Data to be released this week :  
  
Australia manufacturing PMI, services PMI, Japan Jibun Bank manufacturing PMI, industry activity, U.K. Rightmove house price index, Markit manufacturing PMI, Markit services PMI, CBI trends survey, China industrial output, house prices, retail sales, industrial production, France Markit manufacturing PMI, Markit services PMI, Germany Markit manufacturing PMI, Markit services PMI, Italy consumer prices, CPI (EU norm), EU Markit manufacturing PMI, Markit services PMI, labour costs and U.S. New York Fed manufacturing, Markit manufacturing PMI, Markit services PMI, NAHB housing market on Monday.  
  
New Zealand Westpac consumer survey, NBNZ business outlook, NBNZ own activity, GDT price index, Australia housing finance, Italy trade balance, goods trade balance, U.K. ILO unemployment rate, employment change, average weekly earning, claimant count, EU trade balance, Canada manufacturing sales and U.S. building permits, housing starts, redbook, industrial production, capacity utilization, manufacturing output, industrial production, JOLTS job openings on Tuesday.  
  
New Zealand current account, Japan imports, exports, trade balance, Germany producer prices, Ifo business climate, Ifo current conditions, Ifo expectations, U.K. core CPI, CPI, RPI, PPI inputs prices, PPI output prices, PPI core output, EU HICP, HICP core, Canada CPI, CPI core and U.S. MBA mortgage applications on Wednesday.  
  
New Zealand GDP, imports, exports, trade balance, annual trade balance, Australia employment change, unemployment rate, Swiss trade balance, France business climate, U.K. retail sales, retail sales ex-fuel, CBI distributive trades, BoE MPC vote hike, BoE MPC vote unchanged, BoE MPC vote cut, BoE interest rate decision, BoE QE total, BoE QE corporate bond purchases, U.S. initial jobless claims, Philly Fed business index, existing home sales and Canada average weekly earning, wholesale trade on Thursday.  
  
Japan CPI, core nationwide, Germany GfK consumer confidence, France consumer spending, producer prices, Italy producer prices, trade balance, MFG business confidence, consumer confidence, EU current account, consumer confidence, U.K. GfK consumer confidence, GDP, current account, PSNB, PSNCR, U.S. GDP, GDP sales, GDP cons spending, GDP deflator, core PCE prices, PCE prices, personal income, personal spending, core PCE price index, University of Michigan sentiment, KC Fed manufacturing, Dallas Fed PCE and Canada new housing price index, retail sales, retail sales ex-auto, budget balance on Friday.