USD/PKR held steady near the 155 mark on Thursday in light of the latest developments concerning US-China trade talks.
USD/PKR was little changed at 154.300 in late Asian session on Friday.
The Chinese commerce ministry said yesterday that Beijing and Washington were in close communication on trade. However, it did not indicate whether there would be retaliatory steps if additional tariffs were imposed on Chinese goods on Sunday.
Market sentiment received a boost after US President Trump said in a tweet that the US was getting very close to a “big deal” with China. Trump was expected to meet with Trade Representative Robert Lighthizer, Treasury Secretary Steven Mnuchin and White House advisers Larry Kudlow and Peter Navarro to discuss the move.
Meanwhile, the Wall Street Journal reported US negotiators had offered to suspend new tariffs on Chinese imports and to reduce existing tariffs on $360 billion of China-produced goods by 50% in return for guaranteed purchases of US agricultural products.
The exotic pair seemed to have ignored a set of US macro data. The number of Americans filing for unemployment assistance rose more than expected, by 49 000, to 252 000 during the week ended December 8th, while marking their highest level since September 2017. The rise probably does not reflect a pickup in layoffs, since the numbers usually fluctuate during the period after the Thanksgiving Day holiday.
At the same time, US producer prices increased at an annual 1.1% in November, while matching October’s rate. Core PPI also rose at a smaller-than-anticipated annual rate, 1.3% in November, marking the slowest gain since September 2016.
USD was pressured by Fed’s determination to maintain an accommodative financial environment, as Chair Jerome Powell noted on Wednesday rate hikes were less needed than during the mid-1990’s rate-cut cycle and only a significant, persistent rise in inflation would lead to a hike.
On the other hand, trade optimism seemed to have lent certain support. The US Dollar Index was up 0.16% to 96.89 in late Asian trade on Friday, after touching lows not seen since early July.
Today’s market focus will be on the monthly report on US retail sales at 13:30 GMT. Analysts on average expect a 0.4% monthly growth in sales in November, following an increase by 0.3% in October.
Additionally, core retail sales, which exclude large ticket prices and historical seasonality of automobile sales, are expected to increase 0.4% in November, following a 0.2% monthly gain in October. In case month-over-month growth exceeds market expectations, this would have a strong bullish effect on USD, as it would suggest potentially higher inflationary pressure and higher probability of a short-term interest rate hike (and vice versa).
A separate report by the US Census Bureau at 15:00 GMT may show business inventories in the country rose 0.1% in October from a month ago, according to expectations, following zero growth in September. Higher-than-expected increase in inventories would have a limited bearish effect on the USD, suggesting insufficient consumer demand.