US dollar steadies as traders await for more data

London

THE US dollar steadied against major currencies on Monday as traders waited for more data on the US economy, after a disappointing jobs report last week ended a rally in the greenback.

The euro was little changed against the US dollar, after data showed German industry avoided a contraction in December.

Despite coronavirus lockdowns at home and abroad, demand from China helped export-oriented manufacturers in Europe's largest economy weather the Covid-19 pandemic.

Speculators have been reducing short positions in the dollar, but some analysts say better US economic data and continued progress in fighting the Covid-19 pandemic will be needed for further US dollar gains.

"Although much of the optimism towards US macro is probably well founded, it is less apparent this will come to the data ... ," said Kristoffer Kjær Lomholt, chief analyst, FX and rates strategy at Danske Bank.

"Indeed, the US jobs recovery has more or less stalled, and that did leave some space to take EUR/USD higher. The next big theme that may be priced further in to spot is moving ahead with US fiscal talks."

Against the euro, the US dollar traded 0.1 per cent higher at US$1.2032 after a 0.7 per cent slump on Friday. Due today is Sentix's euro zone investor sentiment index for February due at 0930 GMT.

In a note to clients, JP Morgan strategists said they "have growing confidence of underperformance of EUR vs USD."

"That warrants two changes to the portfolio: 1) rotating away from USD to fund trades primarily out of EUR, and 2) selling EUR/USD outright in spot."

The British pound bought US$1.3715, 0.15 per cent lower to the US dollar.

The US dollar was quoted at 105.57 yen, having pulled back from a three-month high reached on Friday. The US economy created fewer jobs than expected in January and job losses the previous month were greater than initially reported, data at the end of last week showed.

US consumer prices and consumer sentiment reports later this week will help determine whether a recent rise in inflation expectations and Treasury yields was justified.

Any disappointing numbers from either report could knock the dollar lower, some analysts said. Investors are also closely monitoring a US debate on additional fiscal stimulus. REUTERS