Dollar Rebounds in FX Markets after Fall
The dollar managed a slight recovery at the start of the year after it slumped steeply in December. Riskier assets, meanwhile, started the year robustly after news that the US and China will finally sign a trade deal.
US President Donald Trump recently announced that Washington and Beijing would sign a preliminary trade deal on January 15.
This announcement diminished the uncertainty surrounding the Phase One trade deal. At the same time, markets believe that Trump’s needs for re-election will limit tensions from the trade war.
In the FX markets, the dollar index was at 96.215. It traded as low as 96.02 as the year transitioned.
But in spite of the recovery, the index has already lost 1% over the previous week. It was weakest against the sterling, Aussie, and loonie.
The euro, on the other hand, was firm at $1.1210 after breaking the $1.1200. It is the first time since April 2019 that the euro breached that level. At present, it appears the common currency is ready to reach its August 2019 peak of $1.1249.
Dollar FX News: Chinese Central Bank Loosens Stance
Meanwhile, the Chinese central bank loosened its policy stance again, cutting its reserve requirement ratio further.
The decision let go of more than $110 billion in liquidity for the local banking system.
China’s domestic banking system has floundered in recent months due to the overhang of corporate debt.
Also, the bank’s decision came amid the news of the trade deal with the US. As a result, the country’s primary stock index also climbed to its highest in almost two years.
Forex Markets Focus on Economic Data
Apart from the dollar’s moves, the market also keeps close tabs on economic releases.
From IHS Markit, the Chinese PMI data slipped ta three-month low. However, it stayed within the expansion territory. Also, there has been a definite bounce in industrial profits last November.
Over in Europe, the Spanish data slipped but not worse than what the market expected. On the other, Italy’s reading declined to 46.2, which is the lowest number since April 2013.
In France and Germany, the numbers inched up marginally from the flash assessments. The figures were 50.4 and 43.7, respectively.
Also, the Federal Reserve is to release the minutes of its December policy meeting later in the day. Initial jobless claims data will also be among the most critical release to come soon.
