• The dollar sagged on Tuesday, knocked away from an eight-month highs versus the yen down as Treasury yields slipped on uncertainty over whether the Republicans can pass their tax bill in a timely manner.
The dollar index against a basket of six major currencies was a shade lower at 94.729 .DXY, slipping slightly from a 10-day peak of 95.077 reached on Monday.
Against the yen, the dollar nudged up 0.15 percent to 113.870 yen JPY=, but still some distance from 114.735 struck the previous day, its highest since mid-March.
The euro was steady at $1.1613 EUR= following its descent to a 10-day trough of $1.1580 overnight.
But the currency sagged as such expectations failed to lift Treasury yields. The benchmark 10-year yield US10YT=RR has slipped steadily toward 2.30 percent after peaking at a seven-month high of 2.47 percent in late October.
• Tonight, Fed Chairman Janet Yellen will speak at an event where she will be given an Award for Ethics in Government. However, we do not expect her to say anything about the monetary policy out look in her speech, and indeed as she steps down in February, her speeches are getting less important by the day.
• Moreover, increased nervousness ahead of the ECB President Draghi’s opening remarks scheduled to be delivered at the ECB Forum on Banking Supervision, in Frankfurt, also keeps the EUR bulls at bay, maintaining risks tilting towards the downside. The major seems vulnerable below a break of 1.1575 support, opening doors for a test of 200-DMA at 1.1401.
• Goldman Sachs expects bitcoin will hit new records, despite a roughly $600 drop in the digital currency from all-time highs.
"The market has shown evidence of an impulsive rally since breaking above 6,044," Sheba Jafari, vice president on the bank's FICC Market Strats team, said in a Sunday note. "Next in focus [$]7,941. Might consolidate there before continuing higher."
• San Francisco Fed President John Williams on Monday laid out a case for an approach to setting U.S. interest rates that, if adopted today, would translate to keeping rates lower for longer in order to give a firmer boost to inflation.
Using so-called price-level targeting, either alone or combined with another approach like a higher inflation target, would help stabilize inflation and keep unemployment low not only when interest rates are near zero but also even when they are higher, Williams told reporters ahead of the paper's release.
• Soaring small-business optimism is translating into big gains for larger, publicly traded companies as Main Street hopes for even more deregulation and hotly anticipated tax reform, Goldman Sachs said.
Shares of big companies that get their revenue from small businesses have rallied 38 percent since the election, while "the Russell 2000 small-cap index has matched the performance of large caps," wrote David Kostin, Goldman's chief equity strategist, in a note to clients. "Small business owners have been thrilled at the prospect of deregulation under the Trump administration."
• South Korea President Moon Jae-in said he hoped a visit by U.S President Donald Trump would be a turning point in efforts to defuse tensions over North Korea’s nuclear programme as the two leaders met in Seoul on Tuesday.
President Donald Trump on Tuesday flew into South Korea, the closest he has come to the frontlines of the nuclear standoff with North Korea, saying a solution must be found to the security threat posed by Pyongyang.
• Japanese Finance Minister Taro Aso said on Tuesday that Japan would not enter a bilateral free trade agreement (FTA) with the United States as a means to resolve the two countries’ trade imbalance.
“We won’t do an FTA to deal with the issue. We agreed we are going to discuss how we should rectify the U.S. trade deficit with Japan through our economic dialogue. There are various ways so we will consider” how to proceed, he said.
• Oil prices largely held on to gains on Tuesday after posting the biggest rise in six weeks a day earlier, buoyed by moves by Saudi Arabia’s crown prince to tighten his grip on power and rising tensions between the kingdom and Iran.
U.S. West Texas Intermediate (WTI) crude CLc1 was down just 4 cents at $57.31 (43.53 pounds) a barrel by 0607 GMT. The contract surged 3 percent on Monday, the biggest percentage gain since late September.
Brent crude futures LCOc1 were down 5 cents at $64.22. On Monday, they closed 3.5 percent higher, also their biggest percentage gain in about six weeks. Both benchmarks hit their highest since mid-2015 during the session.
• Egyptian President Abdel Fattah al-Sisi called on Middle Eastern nations to maintain stability just as tensions were suddenly spiking between Lebanon and Saudi Arabia.
On Saturday, Lebanese Prime Minister Saad al-Hariri shocked the political establishment in Beirut by announcing his resignation. The leader said he was stepping down amid concerns of a potential assassination plot against him. Speaking from Riyadh, Hariri criticized Iran, and its Lebanese ally Hezbollah, for igniting conflict in the region.
• Rating agency Moody’s warned on Tuesday that reopening Lebanon’s political vacuum after the resignation on Saturday of prime minister Saad al-Hariri would damage the tiny country’s credit rating.
Nigeria supports an extension of a deal between OPEC, Russia and other non-members to cut oil supply until the end of 2018 “as long as the right terms are on the table” regarding its own participation, its oil minister said.
Reference: Reuters, FXStreet, CNBC
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