U.S. Dollar Climbs On Trade Optimism, China Stimulus

The U.S. dollar strengthened against its major counterparts in the European session on Thursday, as easing fears about US-Sino trade relations and China stimulus measures boosted investor sentiment.

In a major milestone in a bilateral trade war, U.S. President Donald Trump announced that the phase one trade deal with China will be signed during a White House ceremony on January 15th, and that he would later travel to Beijing to begin negotiations on the next phase.

News of monetary policy easing by China also helped underpin investor sentiment. The People's Bank of China said it would cut banks' reserve requirement ratio by 50 basis points on Jan. 6, freeing up more than USD 100 billion for loans to small businesses.

On the economic front, the U.S. weekly jobless claims for the week ended December 28 and Markit's final manufacturing PMI for December will be highlighted in the American session.

The greenback strengthened to a 3-day high of 0.9711 against the franc and a 2-day high of 1.3188 against the pound, from early lows of 0.9668 and 1.3270, respectively. The next possible resistance for the greenback is seen around 1.00 against the franc and 1.30 against the pound.

After falling to 1.1260 against the euro in the previous session, the greenback reversed direction and appreciated to 1.1183. On the upside, 1.10 is possibly seen as its next resistance level.

Final data from IHS Markit showed that the euro area manufacturing sector continued to contract in December with weakness spread across most of the member countries.

The manufacturing Purchasing Managers' Index fell to 46.3 in December from 46.9 in November. However, the score was above the flash reading of 45.9.

Reversing from its early lows of 0.6740 against the kiwi and 0.7021 against the aussie, the greenback firmed to a 6-day high of 0.6684 and a 3-day high of 0.6983, respectively. The currency is likely to locate resistance around 0.65 against the kiwi and 0.69 against the aussie.

The greenback edged up to 1.3010 against the loonie and 108.87 against the yen, off its early lows of 1.2969 and 108.60, respectively. If the greenback rallies further, it may find resistance around 1.32 against the loonie and 111.00 against the yen.

Looking ahead, the U.S. weekly jobless claims for the week ended December 28 and Markit's final manufacturing PMI for December are set for release in the New York session.