· The dollar recovered from a six-month low to add 0.46% on Thursday, the first trading day of 2020, ending a four-day losing streak and a downbeat December that had left the index virtually flat at the end of 2019.
Bleak data out of Germany and the United Kingdom weakened the euro and pound as demand for the safe-haven dollar picked up. Thursday’s data and dollar move broke with trends in December when the greenback fell as tensions with China eased and global growth prospects rose.
British factory output fell in December at the fastest rate since 2012, a survey showed on Thursday, while a German Purchasing Managers’ Index survey also out on Thursday showed the manufacturing sector contracted further in December.
The euro slipped 0.39%, to $1.117, from Tuesday when it hit the highest level since early August. Against the dollar, the pound was 0.87% weaker at $1.314.
The U.S. dollar index, which tracks the greenback against a basket of its peers, was last at 96.846 after rising from levels below 96.5 yesterday.
· British pound could rally to $1.65 in 2020, strategist predicts
The British pound could soar to $1.65 in 2020 and the currency will be one of the biggest trades in the world, a currency strategist told CNBC Thursday.
Speaking to CNBC’s “Squawk Box Europe,” Michael Harris, founder of Cribstone Strategic Macro, predicted the currency could see a surge as investors revaluated the U.K.’s long-term potential.
“What we’re going to get is a country where everyone has been on hold — this is massive pent-up demand — and as soon as it becomes clear that there’s an investable case here based upon some clarity of the direction of this country, the pound has to rerate,” he said. “It’ll be one of the biggest trades in the world.”
The pound rallied to $1.35 — a jump of more than 2% — following pro-Brexit Boris Johnson’s election victory last month.
However, the currency plunged to $1.31 just days later as Johnson’s government set a deadline of the end of 2020 for the U.K.’s departure from the bloc, refuelling concerns about the possibility of a no-deal Brexit.
Sterling was trading down 0.3% against the dollar at $1.3208 on Thursday morning London time.
Harris told CNBC that he did not consider the prospect of a disorderly Brexit as a realistic risk for the pound.
“I don’t know whether it’s going to $1.55 or $1.75, but I do know this — the pound is going to go huge,” he said. “Maybe it’ll take 18 months, maybe it’ll take 24 months, but the idea that after the election people are still talking about a hard Brexit is absolutely absurd.”
· The U.S.-China trade war entered its second year in 2019, increasingly weighing on both economies amid worsening business sentiment globally.
Here are six charts that look at how the world’s top two economies and their financial markets have performed in the year.
Economic growth slows
Growth in gross domestic product — the broadest measure of an economy — slowed down in both the U.S. and China last year.
China’s official manufacturing Purchasing Managers’ Index — a widely watched indicator of the sector’s health — has stayed in contraction territory for most of the year. That means the index came in below the 50-point level. In the U.S., the manufacturing PMI compiled by the Institute for Supply Management showed factory activity contracting since August.
· Labour is to attempt to delay leaving the EU by two years to prevent a no-deal Brexit, despite the party's crushing defeat in last month's general election.
Jeremy Corbyn has tabled an amendment to the EU Withdrawal Bill being debated by MPs in the Commons next week that will lead to accusations that Labour is attempting to block Brexit.
Labour's amendment, which is doomed to fail now Boris Johnson has a Tory majority of 80 in parliament, would extend the Brexit transition period until 2023 if there is no deal by June.
Labour's amendment calls on the government to seek from mid-June a two-year extension to the implementation period, which runs out at the end of December, unless certain conditions are met.
· Hong Kong begins 2020 just like 2019 ended – with protest chaos
Hong Kong started the first day of the year with a massive anti-government protest march that ended in chaos, as radicals blocked roads, smashed traffic lights, threw petrol bombs, vandalised bank branches, trashed shops and targeted the High Court, while police fired tear gas and water cannons, and arrested hundreds.
· HSBC was forced to close branches and suspend some ATMs in Hong Kong on Thursday after the closure of an account used to raise funds for demonstrators led to the territory’s biggest bank being targeted for the first time.
Ten of its branches or ATMs were shut after undercover police carried out violent arrests of protesters who had turned their ire on HSBC following accusations it helped the police close an account held by Spark Alliance fund, a crowdsourcing operation.
“It just goes to show how difficult it is to navigate the corporate world in Hong Kong at the moment because the protester wrath can turn on you,” said Fraser Howie, a former managing director at CLSA.
· Oil prices moved between gains and losses on Thursday before ending the day little changed amid signs of improving Washington-Beijing trade relations and rising tensions in the Middle East while a strong U.S. dollar put pressure on the commodity.
Brent crude futures were up 0.4% at $66.27 per barrel, while U.S. West Texas Intermediate crude settled up just 0.2% at $61.18 per barrel.
The dollar rose 0.5%, recovering from a six-month low after a downbeat December left the index virtually unchanged for 2019. A stronger dollar makes oil more expensive for holders of other currencies.
Losses in oil prices were limited by optimism that a trade truce between the world’s two largest economies will support energy demand. U.S. President Donald Trump has said Jan. 15 would mark the signing of the U.S.-China Phase 1 trade deal.
“Any delays could put a pullback in the market here,” said Bob Yawger, director of futures at Mizuho in New York.
January also marks the scheduled start of deeper output cuts by the Organization of the Petroleum Exporting Countries and its partners, including Russia.
The group agreed to cut output by a further 500,000 barrels per day (bpd) from Jan. 1, on top of their previous cut of 1.2 million bpd.
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‘Big uncertainty’ over US oil output in 2020 will be critically important to oil prices, analysts say
The question of how much crude U.S. producers may be able to add this year could be pivotal for oil prices in 2020, analysts told CNBC, while warning of the potential for “vicious corrections” in the coming months.
Speaking to CNBC’s “Squawk Box Europe” on Thursday, Chris Weafer, a senior partner at Macro-Advisory, suggested three “critical factors” were set to have the greatest influence over crude futures this year.
The first two factors were identified as oil demand growth and the current deal between OPEC and its allied partners.
The group, often referred to as OPEC+, agreed to cut oil production by an additional 500,000 barrels per day (b/d) from Jan. 1, further deepening their previous cut of 1.2 million b/d.
“The big uncertainty this year — and it is already beginning to be talked about — is: Can or will U.S. producers be able to continue to add as much extra volume as they have been for the last seven or eight years?”
“This is a huge question,” Weafer said.
The International Energy Agency projected last month that total U.S. oil production growth will slow to 1.1 million b/d in 2020, down from 1.6 million b/d in 2019.
In such a scenario, Weafer said that, assuming the OPEC+ deal remains in place, oil prices should trade in the $60 to $70 price range.
Nonetheless, he warned many were becoming concerned that U.S. production growth might have passed its peak, amid speculation the industry will not be able to increase production at the same rate in 2020 as it has done in previous years.
Reference: CNBC, Reuters, South China Morning Post, Financial Times, Sky news, Forex Live
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