Dollar trades mixed on dampened risk appetite

Market Review - 22/01/2020  00:06GMT  

Dollar trades mixed on dampened risk appetite

The greenback traded mixed against its peers as news of a pneumonia-like virus in China dampened risk appetite. Sterling rallied across the board on the back of upbeat UK jobs data.  
  
Versus the Japanese yen, although dollar dropped to 109.91 in Asian morning after the PBOC fixed the yuan rate at a 6-1/2 month high, then lower to 109.90 ahead of European open, price pared its losses and staged a rebound to 110.11 in New York morning on short-covering but only to drop to a 1-week low at 109.77 on falling U.S. Treasury yields before recovering.  
  
Reuters reported China's central bank on Tuesday lifted its official yuan midpoint to the highest in 6-1/2 months to reflect strong gains in the spot yuan in the previous session.   The People's Bank of China (PBOC) set the midpoint rate at 6.8606 per dollar prior to the market open, 58 pips or 0.08% firmer than the previous fix of 6.8664 and the strongest since July 2, 2019.  
  
The single currency retreated to 1.1089 in Asian morning, then lower to 1.1086 in European morning. However, the pair then erased its losses and rallied in tandem with sterling to an intra-day high at 1.1118 in New York morning but only to fall to session lows of 1.1081 near the close on cross-selling in euro.  
  
The British pound dropped to session lows at 1.2996 in Asian morning before rebounding to 1.3021 ahead of European open. Despite retreating again to 1.2996 in early European morning, cable rallied after the release of upbeat UK data and hit an intra-day high at 1.3083 in New York morning before retreating to 1.3040 on profit-taking and then moved sideways.  
  
Reuters reported British job growth was the strongest in nearly a year in the three months to November, according to data which could ease concerns at the Bank of England about the extent of a slowdown in the labour market.   Official data published on Tuesday showed the number of people in employment rose by 208,000 to 32.90 million, the biggest increase since the three months to January 2019 and much stronger than the median forecast in a Reuters poll for a rise of 110,000.   The number of people out of work dropped by 7,000 to 1.31 million and the unemployment rate of 3.8% remained at its lowest level since early 1975.   The ONS said total earnings growth, including bonuses, rose by an annual 3.2%, the same pace as in the three months to October which was the slowest since September 2018.  
  
In other news, Reuters reported U.S. Treasury Secretary Steve Mnuchin said on Tuesday that he thought some projections for U.S. economic growth this year were too low as 2019 figures were dragged down by one-off items, including Boeing's grounding of the 737 Max.   The International Monetary fund on Monday predicted that U.S. growth would slow to 2% this year and 1.7% next year.  
  
On the data front, Reuters reported the Bank of Japan kept monetary policy steady and nudged up its economic growth forecasts on Tuesday, as the government's spending package and receding pessimism over the global outlook take some pressure off the central bank to top up stimulus.   As widely expected, the BOJ maintained its short-term interest rate target at -0.1% and a pledge to guide 10-year government bond yields around 0%, by a 7-2 vote.   It also maintained guidance that commits it to keeping rates at current low levels, or even cut them, until risks keeping it from achieving its 2% inflation goal subside.  
  
Data to be released on Wednesday:  
  
Australia consumer sentiment, France business climate, Italy industrial orders, industrial sales, UK PSNB, PSNCR, U.S. MBA mortgage applications, national activity index, monthly house price, existing home sales, and Canada CPI, new housing price index, wholesale trade, Bank of Canada interest rate decision.