· Sterling was precariously poised as it headed for its worst week in more than two years on Friday, hobbled by familiar fears of a chaotic British exit from the European Union, while firm data helped the dollar arrest its recent slide.
Overnight the pound slipped below $1.30 for the first time in a fortnight. It was last quoted at $1.3022 as worries grow about whether a deal can be secured before the December 2020 hard deadline.
Elsewhere, the greenback found broad support. Solid housing starts and firmer-than-expected manufacturing data this week helped to halt two weeks of declines against a basket of currencies. The dollar index rose slightly to 97.440.
Nobody expects the U.S. Federal Reserve to move interest rates anywhere when it meets in January.
The dollar last traded a whisker stronger on the Japanese yen at 109.31 and a tiny bit weaker against the euro at $1.1116. The dollar has gained 0.7% on the yen this week.
· USD/JPY is currently trading at 109.36 and is stuck in a tight range of between 109.29 and 109.40. USD/JPY has been consolidating into the last day for the week in Asia, but it slipped from 109.60 to as low as 109.18 overnight.
The USD/JPY pair is bearish in the short-term as the 4-hour chart shows that it finally moved away from its 20 SMA, which now gains bearish strength above the current level. Technical indicators have pared their declines, but remain at daily lows. The next relevant support is 108.90, with a break below the level favoring a bearish extension during the last trading day of the week.
Support levels: 108.90 108.60 108.25
Resistance levels: 109.40 109.75 110.00
· China stood pat on its lending benchmark rate on Friday, as widely expected, after the central bank kept borrowing costs of medium-term loans steady earlier this month.
Economic growth slowed to near 30-year lows in the third quarter and speculation is mounting that Beijing needs to roll out stimulus more quickly and more aggressively.
The one-year loan prime rate (LPR) was unchanged at 4.15% from the previous monthly fixing. The five-year LPR also remained the same at 4.80%.
· U.S. Treasury Secretary Steven Mnuchin said the new North American trade agreement will give the U.S economy a boost.
“I think we are going to get an excess 50 basis points of additional growth in GDP as a result of this agreement. People who say this is just the NAFTA 2.0 just don’t understand the technicalities of this agreement,” Mnuchin said on CNBC’s “Squawk on the Street” on Thursday.
· Markets may have “priced in” the de-escalation of the U.S.-China trade war as the phase one deal looks set to soften risks related to global growth, but one unpredictable factor remains: technological restrictions the U.S. may impose on China going forward.
That’s according to S&P Global Ratings’ APAC chief economist Shaun Roache, who suggested that whichever wins in technology will also dominate the world.
“I think we may see some moves by the U.S. towards non-tariff measures next year, particularly in the technology sector and that’s going to create more uncertainty, more concern again as we go through 2020,” he said.
The economist said constraints could be specific export controls on certain sectors and restricting Chinese firms’ ability to invest overseas and gain access to technology they need. These measures would make it harder for China to develop its own technology supply chains, Roache said.
· President Donald Trump said on Thursday he wants an immediate trial in the Senate, after House Speaker Nancy Pelosi said she would not hand off impeachment to the Senate until she learned how Republicans would manage the proceeding.
· Analysts at TD Securities note that the US jobless claims were 234K for the week of Dec 14, down from 252K but still up from what has been a sub-220K trend.
Key Quotes
“Consensus was looking for a lower 225K print. The 4-wk avg is now 226K, up from 224K last week and 218K two weeks ago. On the surface, the numbers suggests the labor market is weakening, but we suspect the rise mainly reflects seasonal adjustment issues (that is why we had forecast a still-high 240K this week). That said, the data remain important to watch in the weeks ahead.”
· Oil prices were steady close to three-month highs on Friday, heading for a third consecutive weekly rise, on the back of easing Sino-U.S. trade tensions that have weighed on demand as well as the global economic growth outlook.
Brent futures LCOc1 were up 6 cents, or 0.09%, to $66.60 a barrel by 0732 GMT, while U.S. West Texas Intermediate crude CLc1 was down 6 cents, or 0.1%, at $61.12 per barrel.
Progress in a long-running trade dispute between the United States and China, the world’s two biggest oil consumers, has boosted expectations for higher energy demand next year.
Reference: Reuters, CNBC, FXStreet
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