Reports that the US would drop labelling China as a currency manipulator further supported risk appetite.
Reports that the US would drop labelling China as a currency manipulator further supported risk appetite as trade optimism continued.
The yen lost ground with USD/JPY at 7-month highs as it pushed above the 110.00 level. The dollar overall was held in tight ranges as potential defensive demand also faded with a move into alternative assets
The US employment trends index declined to 109.7 for December from 110.5 previously, although the market was not data driven. Boston Fed President Rosengren stated that the economy faced upside inflation and financial stability risk. In his opinion low rates may induce too many financial risks and are below a neutral rate given the heathy economy.
There was little overall market impact with strong expectations that the Federal Reserve would maintain interest rates on hold in the short term. Firm global risk appetite tended to curb dollar support slightly with investors looking to target alternative assets with a dip in potential defensive demand. The US currency overall was unable to make headway and EUR/USD settled around 1.1140 with the single currency holding a firm tone on Tuesday ahead of the latest US CPI inflation data.
The Euro drew some support from higher German bond yields with EUR/USD creeping higher. Sterling was undermined by a weaker than expected GDP release and dismal industrial production data with GBP/USD dipping below 1.3000.
Precious metals were on the defensive amid a lack of demand with silver losing key support. Bitcoin jumped early in Asian trading to post 8-week highs near $8,500.
UK GDP declined 0.3% for November compared with expectations of a marginal decline, although the 3-month running estimate at 0.1% was slightly above market expectations, but annual growth was confirmed at a 6-year low.
Industrial production was notably weak for November with a 1.2% decline to give an annual contraction of 1.6%. Manufacturing output declined 2.0% over the year and was a significant drag on the overall GDP data. Construction output was above consensus forecasts and there was a sharp narrowing of the monthly trade deficit to £5.3bn from £10.9bn the previous month with distortions from gold trade. The GDP data reinforced speculation over a Bank of England rate cut with future markets pricing in a 50% chance of a cut at the January meeting with a cut fully priced in by September.
Sterling lost further ground following the data with GBP/USD lows near 1.2960. Firm global risk appetite provided an element of currency support and there was a GBP/USD recovery to near 1.3000, although GBP/EUR fell to trade around 1.1660. Sterling dipped again on Tuesday with GBP/EUR at fresh 2020 lows below 1.1660.
|13:30||USD CPI Ex Food & Energy (Y/Y)(DEC, 2019)||2.30%||2.30%|
|13:30||USD CPI Ex Food & Energy (M/M)(DEC, 2019)||0.20%||0.20%|
|13:30||USD CPI (M/M)(DEC, 2019)||0.20%||0.30%|
|13:30||USD CPI (Y/Y)(DEC, 2019)||2.30%||2.10%|
|14:00||FOMC member John C. Williams speech||-||-|
|19:00||Monthly Budget Statement(DEC, 2019)||-||-209.0B|