Dollar maintains steady bias on rising U.S. yields after U.S.Ecomoic Adviser Kudlow's positive comments

Market Review - 16/12/2019  23:47GMT  

Dollar maintains steady bias on rising U.S. yields after U.S.Ecomoic Adviser Kudlow's positive comments

Despite trading with a soft undertone in Asian morning on Monday following broad-based decline in Friday's New York session, the greenback regained traction in New York session after upbeat comments by U.S. Ecomoic Adviser Kudlow.    
In an interview with Fox News Channel, National Economic Council Director Larry Kudlow said U.S. exports to China will double under the so-called "Phase One" trade deal reached between Washington and Beijing, a top White House adviser said on Monday.  "They're ... going to double our exports to China,"   
  
Versus the Japanese yen, although the pair moved narrowly in subdued Asian morning following decline from 109.70 to 109.21, price ratcheted higher from 109.26 (NZ) to 109.67 in New York session as rising U.S. treasury yields bosted risk-on sentiment and triggered broad-based yen selling. Dollar last traded at 109.54 near the close.  
  
The single currency swung broadly sideways with initial upside bias in Europe following last Friday's decline from a 4-month high of 1.1199 to 1.1112. Price edged higher from 1.1123 (NZ) to 1.1150 in European morning, despite a pullback to 1.1127, euro climbed to session highs of 1.1158 in New York morning due partly to buying in eur/yen and eur/gbp cross trading before retreating to 1.1136 as the greenback caught a bid in New York trading.  
  
In other news, Reuters just reported euro zone business growth remained weak in December, with tepid foreign demand exacerbating a contraction in manufacturing and offsetting a slight pick-up in services activity.  IHS Markit's Euro Zone Composite Flash Purchasing Managers' Index (PMI), seen as a good guide to economic health, stayed at 50.6 in December, a touch below a median 50.7 predicted in a Reuters poll. Anything above 50 indicates growth.  
  
The private sector business report published on Monday suggests the risks to the euro zone outlook remain skewed to the downside, despite Christine Lagarde's more upbeat tone in her first news conference as head of the European Central Bank.  The PMI for the bloc's dominant service industry rose to a four-month high of 52.4 from 51.9, and above 52.0 predicted in a Reuters poll.  
  
Sterling moved in a relatively narrow range following last Friday's impressive rally from 1.3131 to a 1-1/2 year peak of 1.3516 on projected landslide election win by the ruling Conservative Party. Price edged higher from 1.3345 (NZ) to session highs of 1.3422 at European open but only to erase intra-day gains and fall back to 1.3324 in European morning. Price swung sideways in New York morning before falling marginally lower to 1.3322 in New York afternoon.  
  
Reuters reported British businesses endured their worst downturn since mid-2016 in the run-up to Prime Minister Boris Johnson's landslide victory in a national election last week, a survey showed on Monday.  The 'flash' early reading of the IHS Markit/CIPS UK Purchasing Managers' Indexes (PMI) for Britain showed on Monday that the decline in both the services and manufacturing sectors has accelerated unexpectedly in December.  
  
The readings suggested the world's fifth-biggest economy is on course to contract in the fourth quarter, survey compiler IHS Markit said, although the PMIs have overstated weakness in previous quarters, partly because of higher government spending before Brexit.  This is also only the second month for which IHS Markit has released flash PMIs for Britain, and November's flash estimates were revised up significantly when final data came out.  

Reuters earlier reported Bank of England Governor Mark Carney and other top officials from the central bank spoke to reporters on Monday after the BoE published its Financial Stability Report which looks at risks to the economy from the financial sector.  "The worst case scenario is effectively a no-deal disorderly Brexit. The probability of that scenario has gone down because of the election results and the intention of the new government. But the scenario itself and... the risks which we protect the system against has not itself changed, it's just become less likely."  "People would expect us... to continue to ensure that the system is ready."   "Until we have a deal and a transition to that deal, we will continue to have arrangements in place, whether they're additional liquidity, ensure that the capitalisation of banks are consistent or arrangements such as temporary but important cross-border arrangements that have been put in place around the derivative markets... as a bridge to the final relationship."  
  
Data to be released on Tuesday :  
  
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.