· The euro advanced to a three-month high against the dollar on Monday, as bearish bets on the U.S. currency remained solid after the Federal Reserve signaled last week it could soon cut interest rates.
The euro stretched its rally last week, when it added 1.4%, and rose about 0.15% to $1.1386 in early Asian trade, its highest since March 22. It last traded at $1.1381.
The dollar index versus a basket of six major currencies was a shade lower at 96.107, having struck 96.093 on Friday, its lowest since March 21, after the Fed last week opened the door for a potential rate cut as early as next month.
· “It is true that the ECB may have to ease policy especially with the Fed having shifted to an easing bias,” said Yukio Ishizuki, senior currency strategist at Daiwa Securities.
“But the ECB already employs a negative interest rate policy and does not have much further room to ease even if they wanted to, unlike the Fed. It is factors like these which have seemingly supported the euro.”
· The dollar nudged up 0.1% to 107.395 yen after retreating to a near six-month low of 107.045 on Friday.
But it is difficult to see the greenback fall beyond 105 yen as a sustained flight from dollar-assets was unlikely, said Koji Fukaya, director at FPG Securities in Tokyo.
· EURUSD TECHNICAL ANALYSIS
EURUSD broke through an 18-month descending resistance channel, largely as a result of US Dollar weakness caused by increasing rate cut expectations from the Fed. The pair fell just short of 1.1388 and may struggle to break past it. The path of least resistance suggests that the pair will either shy away or will briefly test the ceiling before capitulating.
· U.S. cyber attacks against Iranian targets have not been successful, Iran’s telecoms minister said on Monday, after reports that the Pentagon had launched a long-planned cyber attack to disable his country’s rocket launch systems.
However, Yahoo News reported on Thursday that the United States had launched cyber attacks, even as Trump backed away from a conventional attack.
The Washington Post said on Saturday that the cyber strikes, which were previously planned, had disabled Iranian rocket launch systems. U.S. officials have declined to comment.
The United States has also accused Iran of stepping up cyber attacks.
· The Chinese government would like the U.S. to cancel “inappropriate” actions against Chinese companies, vice commerce minister Wang Shouwen said Monday.
“We hope the U.S. side, under the principles of free trade and the spirit of WTO (World Trade Organization) principles, can cancel these inappropriate measures against Chinese companies, and remove them from the entity list. This has benefits for both sides,” Wang said in Mandarin, according to a CNBC translation.
· Malaysian Prime Minister Mahathir Mohamad said on Saturday that he’s willing to conclude a mega Asia-Pacific trade agreement without India “for the time being.”
Mahathir was referring to the Regional Comprehensive Economic Partnership, or RCEP, which involves 16 countries in Asia Pacific. Negotiations have been going on since 2013, with one of the major sticking points being India’s reluctance to open up its markets.
A recent report by Nikkei Asian Review said China, growing impatient with the slow progress on RCEP talks, proposed going ahead with just 13 countries — removing India, Australia and New Zealand from the deal.
The 16 countries involved in RCEP are the 10 Southeast Asian nations and six of their large trading partners: China, Japan, South Korea, India, Australia and New Zealand. If the agreement is finalized, the 16 countries will form a major trading bloc that covers around one-third of the world’s gross domestic product.
Several participating countries of RCEP have expressed hopes of coming to an agreement by the end of this year, as they say the U.S.-China tariff fight has brought fresh urgency to wrap up talks in Asia Pacific.
· China’s Assistant Minister of Foreign Affairs Zhang Jun said on Monday that China will not allow the Group of 20 nations to discuss the Hong Kong issue at its summit this week.
Millions of people demonstrated on the streets of Hong Kong this month against a bill that would allow people to be extradited to the mainland to face trial in courts controlled by the Communist Party.
· Oil prices rose on Monday to extend gains from last week, bolstered as tensions remain high between Iran and the United States after U.S. Secretary of State Mike Pompeo said “significant” sanctions would be announced on Tehran.
Brent futures were up 50 cents, or 0.8%, at $65.70 a barrel by 0655 GMT.
West Texas Intermediate crude was up 70 cents, or 1.2%, at $58.13 a barrel.
U.S. President Donald Trump said last week that he called off a military strike to retaliate for Iran’s downing of an unmanned U.S. drone, and he said on Sunday that he was not seeking war with Iran.
But Pompeo also said “significant” sanctions on Iran would be announced on Monday aimed at further choking off resources that Tehran uses to fund its activities in the region.
Reference: CNBC, Reuters, Daily FX
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