USD/PKR: Rupee Gains Ground as US-China Signs Phase-One Deal

Wednesday’s trade saw USD/PKR within the range 154.50-154.91. The pair closed 0.06% lower at 154.60. The sentiment was marked by cautious optimism ahead of the official signing of the 86-page “Phase One” deal between China and the US.

At the center of the agreement is a pledge by China to buy at least an additional $200 billion of US farm products and other goods and services in two years.

Although it rolls back certain tariffs, the deal will leave intact 25% tariff on $250 billion range of Chinese industrial goods and components used by US manufacturers. Treasury Secretary Steven Mnuchin said that a future “Phase Two” deal between the two countries would ease US tariffs on goods purchased from China even if the following agreements are segmented into several rounds.

The US Dollar Index was gaining 0.02% to 97.22 in late Asian trade on Thursday, being close to a one-week low of 97.16.

Today’s market focus will be on the monthly report on US retail sales at 13:30 GMT. Analysts on average expect a 0.3% monthly growth in sales in December, following an increase of 0.2% in November.

Additionally, core retail sales, which exclude large ticket prices and historical seasonality of automobile sales, are expected to increase by 0.5% in December, following a 0.1% monthly gain in November. In case month-over-month growth exceeds market expectations, this would have a strong bullish effect on the USD, as it would suggest a potentially higher inflationary pressure.

Also at 13:30 GMT, the Federal Reserve Bank of Philadelphia will report on manufacturing activity in the area. The Philadelphia Fed Manufacturing Index probably increased to 3.8 in January, according to market expectations, from a level of 0.3 in December. A reading above zero shows improving business conditions.

A separate report by the US Census Bureau at 15:00 GMT may show business inventories in the country dropped 0.1% in November from a month ago, according to expectations, following a 0.2% growth in October. A higher-than-expected decrease in inventories would have a limited bullish effect on the USD, suggesting sound consumer demand.

Also at 15:00 GMT Fed Governor Michelle Bowman is expected to speak on “The Outlook for Housing” at the Home Builders Association of Greater Kansas City: 2020 Economic Forecast Breakfast.

USD/PKR was up 0.04% to 154.66 in late Asian session on Thursday.

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