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Forex Today: Kiwi strongest amid post-trade deal cautious optimism; eyes on US Retail Sales

Cautious optimism emerged as the main underlying theme in Thursday’s Asian session, despite the conclusion of the historic US-China phase one trade deal. Markets remained on the edge as a number of conflicting issues are stiff left unresolved, including the structural economic issues. Also, they remained skeptical of the phase two deal, especially with the US presidential election scheduled later in November.

As markets re-assessed the trade deal, the US dollar kept its range nearly weekly lows across its main competitors. The Kiwi outperformed amid better New Zealand’s fundamentals that led the gains in most Asian currencies. The Chinese yuan eased from a six-month high vs. the US dollar but held onto minor gains near 6.8870 region.

Meanwhile, the Aussie defended the 0.69 handle, having drawn support from higher oil and gold prices. The USD/JPY pair was trapped in a tight range just below 110.00 despite the gains in the S&P 500 futures and Treasury yields. Mixed trading in the Asian equities and solid Japanese Machinery Orders data underpinned the yen.

Among the European currencies, EUR/USD consolidated around the midpoint of the 1.11 handle, slightly off the weekly highs while GBP/USD extended the early gains to regain 1.3050 amid Brexit optimism. USD/CHF traded modestly flat below 0.9650, divided between a broadly subdued US dollar and reduced demand for a safe-haven.

Main Topics in Asia

NZ: Monthly Inflation Gauge surged 0.4% in December – ANZ

Japan’s Manufacturers Index seen steady at -6 in January – Reuters Tankan

US Treasury Sec Mnuchin: USMCA and US-China trade deal will add 50 to 70 basis points to US GDP – Fox

US VP Pence: Already begun discussions on Phase-two deal – FBN

SNB can leverage its balance sheet if needed, Schlegel says

Chinese VP Liu He: China 2019 growth projected to be above 6% - Xinhua

US-China phase one trade deal still carries three risks - FT

China’s Finance Ministry issues statement on phase one trade deal with the US

USD/IDR bounces off 23-month highs at 16,320

PBOC: Will strengthen financial supervision and prevent risks in financial opening process

China’s Vice Premier Liu: China will steadily push forward capital account opening, yuan internationalization

Sources: India plans new law to protect foreign investment - Reuters

Key Focus Ahead       

As the dust settles over the phase one trade deal, the attention now turns towards the macroeconomic releases for near-term trading opportunities. Therefore, the immediate focus now turns to the German Final Consumer Price Index (CPI) due at 0700 GMT. Later in the EU session, the Turkish central bank rate decision and the European Central Bank (ECB) monetary policy meeting’s accounts will grab some attention.

The main event risk, however, remains the US Retail Sales data for December due at 1330 GMT alongside the weekly Jobless Claims and Canadian ADP Employment Change numbers. Also, of relevance remains the speeches by the Fed official Bowman and ECB President Lagarde, scheduled at 1500 GMT and 1800 GMT respectively.

EUR/USD hovering near-weekly peak, eyes US Retail Sales

EUR/USD remains mildly bid near 1.1150 heading into the European trading this Thursday. The upside is favored if treasury yields extend Wednesday's drop. Later in the day, the focus will be on US Retail Sales release. 

GBP/USD registers three-day winning streak amid Brexit drama

GBP/USD keeps its bid tone intact near 1.3050 ahead of the London open on Thursday. The pair benefits from the US dollar (USD) weakness and ignores downbeat UK fundamentals that boosted the odds for a BOE rate cut and negated the Brexit optimism.

US Retail Sales December Preview: ‘Twas the month after Christmas

The US Retail sales expected to have the best holidays in three years. Control group sales a GDP component predicted to rise 0.4%. Labor market continues to foster robust consumer sentiment.
China Fourth Quarter GDP Preview: Q4 is an afterthought

China’s growth expected to be unchanged at the modern-era low. US trade deal should boost the mainland economy in the first half.



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