Dollar pares initial losses on risk-aversion

Market Review - 16/07/2020 23:58GMT  

Dollar pares initial losses on risk-aversion

Although the greenback weakened in European session as the release of record U.S. retail sales data improved risk sentiment, dollar pared its losses and rebounded across the board in New York as concerns about the rising number of coronavirus infections triggered risk-off trade.  
  
Reuters reported the Commerce Department said on Thursday retail sales rose 7.5% last month. That was on top of the 18.2% jump in May, which was the biggest gain since the government started tracking the series in 1992. Economists polled by Reuters had forecast retail sales advancing 5% in June.    A separate report from the Labor Department on Thursday showed 1.30 million people filed for state unemployment benefits during the week ending July 11, slightly down from 1.31 million in the prior period. Economists had forecast 1.250 million applications last week.   
  
Versus the Japanese yen, dollar found renewed buying at 106.84 in Asian morning and rose to 107.03. Despite retreating to 106.87 on weakness in U.S. Treasury yield, price then rallied to session highs at 107.39 New York afternoon on safe-haven usd buying due to U.S.-China tensions as well as rise in global coronavirus infections before stabilising.  
  
The single currency met renewed selling at 1.1420 in Australia at fell to 1.1394 at European open on cross-selling in euro before rebounding to 1.1415 but only to retreat to 1.1379 on usd's broad-based strength. However, the pair erased intra-day losses and later rallied to an intra-day high at 1.1442 in New York after European Central Bank left interest rates unchanged before falling to session lows at 1.1371 in late New York on risk-aversion.  
  
Reuters reported the interest rate on the main refinancing operations and the interest rates on the marginal lending facility and the deposit facility will remain unchanged at 0.00%, 0.25% and -0.50% respectively.     The Governing Council will continue its purchases under the pandemic emergency purchase programme (PEPP) with a total envelope of 1,350 billion euros.     Net purchases under the asset purchase programme (APP) will continue at a monthly pace of 20 billion euros, together with the purchases under the additional 120 billion euros temporary envelope until the end of the year.   
  
The British pound also fell in tandem with euro from 1.2593 in Australia to 1.2538 at European open, then to session lows of 1.2520 on safe-haven usd buying. However, renewed buying interest emerged and cable rallied to 1.2625 in New York morning due partly to cross-selling of sterling especially vs euro before retreating sharply to 1.2638 on profit-taking and traded at 1.2553 near the close.  
  
Reuters reported early indicators suggested that the number of employees on companies' payrolls was down by 649,000 between March and June with the largest falls at the start of the pandemic, the Office for National Statistics said.     Britain's unemployment rate unexpectedly held at 3.9% in the three months to May. A Reuters poll of economists pointed to a rise in the unemployment rate to 4.2%.     
In other news, Reuters reported, a deal on the EU's proposed stimulus scheme to start economic recovery from the coronavirus pandemic is not certain at the bloc's summit this Friday and Saturday as major differences persist between member states, a senior official in Brussels said on Thursday.  
  
Data to be released on Friday :  
  
New Zealand manufacturing PMI, UK GfK consumer confidence, Italy industrial orders, industrial sales, EU construction output, HICP, core HICP, Canada wholesale trade, and U.S. building permits, housing starts, University of Michigan sentiment.