USD/PKR traded mostly lower on Monday, while touching fresh lows unseen since early July, as the announcement of a “phase one” trade deal between the US and China spurred demand for riskier assets.
Under the interim deal, the US will not impose 15% tariffs on $160 billion worth of Chinese goods, scheduled to come into effect on Sunday. The US will also reduce by half to 7.5% the tariff rate imposed on $120 billion of Chinese goods on September 1st.
At the same time, China has pledged to import additional US goods and services worth $200 billion during the upcoming two years on top of the amount the country purchased in 2017.
China’s Customs Tariff Commission of the State Council also said that additional tariffs on some US goods, which were to come into effect on December 15th, had been suspended. Those included a 25% tariff on automobiles manufactured in the US.
On Sunday US Trade Representative Robert Lighthizer said the trade deal was “totally done”, despite the need for translation and revisions to its text. Lighthizer also said the date, when the agreement will be formally signed by the two countries, was still being determined.
However, market relief may be short-lived, as a more difficult phase two of the trade agreement still lies ahead.
Meanwhile, a Monday report by Pakistan Bureau of Statistics showed the country’s trade deficit had shrunk to PKR 299.8 billion ($1.93 billion) in November, or the smallest gap since August. The numbers added to prospects of improving current account in Q4. In October, the country reported a $99 million current account surplus or the first positive balance in four years, due to a significant decrease in imports.
The US Dollar Index was down 0.02% to 97.12 in late Asian trade on Tuesday.
From a macroeconomic perspective, today market players will be paying attention to US housing data at 13:30 GMT. The number of housing starts in the country probably rose to 1.340 million units in November, according to market expectations, from the seasonally adjusted annual rate of 1.314 million in October.
Additionally, the number of building permits probably dropped to 1.410 million in November from an annual level of 1.461 million in October. In case a higher-than-expected figure for either of the two indicators is reported, this would have a moderate bullish effect on USD.
A separate report by the Board of Governors of the Federal Reserve at 14:15 GMT may show industrial production in the country expanded at a monthly rate of 0.8% in November, according to expectations, after shrinking 0.8% in October. A larger-than-expected monthly increase in output would have a moderate bullish effect on the USD, as it would suggest a higher inflationary pressure.
USD/PKR was up 0.12% to 154.550 in late Asian session on Tuesday, after touching 154.250, or a fresh five-month low.