· The U.S. dollar index recorded its smallest-ever annual move in 2019, up just 0.24% for the year after a drop in December reversed early gains as trade hopes and investor confidence diminished demand for the safe-haven asset.
The pound GBP=, the euro EUR= and a clutch of trade-sensitive currencies rallied as the dollar slid to a six-month low on Tuesday as investor optimism about global growth prospects and the Phase 1 U.S.-China trade deal spurred a risk-on move.
U.S. President Donald Trump said on Tuesday that the first phase of an American trade deal with China would be signed on Jan. 15 at the White House, though considerable confusion remains about the details of the agreement.
The dollar index .DXY was last down 0.33% to 96.418, its fourth consecutive session in the red and its weakest level since July 1. The Phase 1 trade agreement reached earlier in December has pulled the dollar down 1.89% in the last month.
The dollar had recorded a strong 2019 before December, owing to the outperformance of the U.S. economy and a long period of uncertainty in the negotiations between Washington and Beijing.
“Weakness in the U.S. dollar toward the end of this year has coincided with the renewed expansion of the Fed’s balance sheet and the paring back of pessimism over the outlook for global growth,” MUFG analysts said.
On the last trading day of the year, the dollar was up just 0.24% for 2019, compared with 4.4% in 2018. At the end of November, it was up 2.18% for the year.
Investors’ appetite for risk drove the euro to $1.124, a five-month high. It was last trading 0.22% higher at $1.122.
Sterling hit a two-week high against the dollar, although the possibility of a “no-deal” Brexit at the end of 2020 is still weighing on the pound.
· Trump says U.S.-China trade deal will be signed on January 15
U.S. President Donald Trump said on Tuesday that Phase 1 of trade deal with China would be signed on Jan. 15 at the White House, though considerable confusion remains about the details of the agreement.
The president wrote in a tweet that he would sign the deal with “high level representatives of China” and that he would later travel to Beijing to begin talks on the next phase.
· Manufacturing activity in China expanded for a second straight month in December as seasonal demand and signs of progress in trade talks with Washington boosted factories’ output and order books.
China’s official Purchasing Managers’ Index (PMI) was unchanged at 50.2 in December from November, the National Bureau of Statistics said on Tuesday, slightly higher than the 50.1 expected in a Reuters poll of analysts.
Growth in China’s services sector activity cooled in December, official data showed on Tuesday.
The official services PMI slipped to 53.5, from an eight-month high of 54.4 in November, the National Bureau of Statistics said.
It also remained above the 50-point mark that separates monthly growth from contraction.
· China’s central bank said on Wednesday that economic growth remains resilient despite relatively large downward pressure and mounting external uncertainty.
The People’s Bank of China (PBOC) will work on preventing and defusing financial risks amid “profound changes” in the domestic and international economy, it said in a statement following the fourth-quarter meeting of its monetary policy committee.
The PBOC said it will keep the yuan exchange rate CNY=CFXS balanced and stable and use multiple monetary tools and flexible policy to maintain liquidity.
· Taiwan President Tsai Ing-wen said on Wednesday the island would not accept a “one country, two systems” political formula Beijing has suggested could be used to unify the democratic island, saying such an arrangement had failed in Hong Kong.
· South Korea’s consumer inflation picked up in December but its full-year reading set a record low as consumer demand remained shaky, reinforcing expectations that the central bank will need to cut interest rates again next year.
The consumer price index rose 0.7% in December from a year earlier, the statistics agency said on Tuesday, up sharply from a 0.2% rise in November and slightly faster than a median 0.6% gain tipped in a Reuters survey.
Still, the average rate of inflation for all of 2019 came to a record-low 0.4%, compared with 1.5% in 2018, as pessimistic consumer and corporate demand as well as good weather conditions pressured price growth across the board
· North Korean leader Kim Jong Un warns of ‘shocking’ action, new strategic weapon
North Korean leader Kim Jong Un said Wednesday he will continue developing his country’s nuclear deterrent and introduce a new strategic weapon in the near future, according to the North’s state-run media KCNA.
Kim’s remarks came after the United States missed a year-end deadline for a restart of denuclearization talks.
The White House and the Pentagon did not immediately respond to CNBC’s request for comment.
· U.S. President Donald Trump said on Tuesday North Korean leader Kim Jong Un had signed a contract about denuclearization and that he thought the North Korean leader was a “man of his word.”
· Oil prices rose on Monday to three-month highs, lifted by optimism over an expected China-U.S. trade deal and upbeat industrial data, while traders kept a close watch on the Middle East following U.S. air strikes in Iraq and Syria.
International benchmark Brent LCOc1 reached $68.99 a barrel, while U.S. crude futures CLc1 hit $62.34 a barrel, both the highest since Sept. 17. For the year, Brent has risen around 27% in 2019, and the U.S. benchmark is up about 36%.
Brent crude futures LCOc1 rose 28 cents to settle at $68.44 a barrel. West Texas Intermediate (WTI) crude CLc1 futures fell 4 cents to settle at $61.68 a barrel.
White House trade adviser Peter Navarro told Fox News in an interview that the U.S.-China Phase 1 trade deal would likely be signed in the next week.
He cited but did not confirm a report that Chinese Vice Premier Liu He would visit this week to sign the deal.
“Washington has sent an invitation and Beijing has accepted it,” the South China Morning Post quoted a source as saying.
· Oil prices steady, on track for biggest yearly rise since 2016
Oil prices held steady on the final day of the year on Tuesday, heading for their biggest annual rise since 2016, supported by a thaw in the prolonged U.S.-China trade dispute and supply cuts.
Brent crude futures for March delivery, the new front month contract, were at $66.66 a barrel, down 1 cent, by 0258 GMT. Brent for February delivery closed on Monday at $68.44 .
U.S. West Texas Intermediate (WTI) crude for February was down 3 cents at $61.65.
Brent has gained about 24% in 2019 and WTI has risen roughly 36%. Both benchmarks are set for their biggest yearly gain in three years, backed by a breakthrough in U.S.-China trade talks and output cuts pledged by the Organization of Petroleum Exporting Countries (OPEC) and its allies.
· After air strikes, U.S. officials concerned about retaliation and Iran tensions
U.S. military officials said they are closely watching for reprisals for American air strikes in Iraq and Syria against an Iran-backed militia group, with the potential for a cycle of retaliatory actions that could inflame tensions between Washington and Tehran.
· U.S. President Donald Trump said on Tuesday that Iran will be held accountable for lives lost in attacks on any U.S. facilities.
“Iran will be held fully responsible for lives lost, or damage incurred, at any of our facilities. They will pay a very BIG PRICE! This is not a Warning, it is a Threat,” Trump wrote on Twitter hours after protesters angry about U.S. air strikes on Iraq hurled stones and torched a security post at the U.S. Embassy in Baghdad.
“The U.S. Embassy in Iraq is, & has been for hours, SAFE! Many of our great Warfighters, together with the most lethal military equipment in the world, was immediately rushed to the site,” Trump said.
Reference: CNBC, Reuters
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