· The safe-haven yen fell to two-week lows against the dollar on Thursday, as the United States and Iran moved away from an all-out conflict, prompting investors to take on more risk and shift focus to an upcoming U.S.-China trade deal and a U.S. non-farm payrolls report.
The yen, a safe haven in times of geopolitical turmoil because of its deep liquidity and Japan’s current account surplus, reversed gains against the dollar after Iran’s missile strike. The dollar was last up 0.4% at 109.51 yen, after hitting 109.57 yen, its highest since Dec. 27.
In afternoon trading, the dollar index was 0.1% higher on the day at 97.433 .
Focus is expected to shift back to the global economy, with expectations the United States and China will sign a trade deal next week providing underlying support for risk assets.
Investors think the deal will clear one of the world economy’s biggest uncertainties and help boost global growth this year, although some think that view is too optimistic.
Market participants are also looking ahead to Friday’s U.S. non-farm payrolls report, with forecasts of 164,000 new jobs in December, from 266,000 the previous month.
“The forecast of 160,000 jobs or so is not a big number so I think there is a little room for an upside surprise,” said Tempus’ Doyle. “I will be looking at November’s number of 266,00 - whether that will be revised.”
In other currencies, China’s yuan rose to a five-month high of 6.9175 against the dollar overnight in the offshore market, boosted by a steady inflation readout.
· New applications for U.S. jobless benefits fell more than expected last week, but the labor market appears to be cooling, with the number of Americans on unemployment rolls surging to more than a 1-1/2-year high at the end of 2019.
Initial claims for state unemployment benefits dropped 9,000 to a seasonally adjusted 214,000 for the week ended Jan. 4, the Labor Department said on Thursday. The fourth straight weekly decline saw claims almost unwinding the jump in early December, which was blamed on a later-than-normal Thanksgiving Day.
“Jobless claims have returned to normal levels, showing the labor market is in a good place,” said Chris Rupkey, chief economist at MUFG in New York.
· Trump says he could wait to finish China trade deal until after 2020 election
President Donald Trump may not reach the second part of a trade pact with China until after the 2020 election, he said Thursday.
The president said his administration will start “right away” negotiating the next piece of an agreement after striking a so-called phase one deal. But he said “it’ll take a little time” to finish an accord and suggested he could have more leverage after his reelection bid in November.
“I think I might want to wait to finish ’til after the election, because by doing that, I think we can actually make a little bit better deal, maybe a lot better deal,” Trump told reporters at the White House.
The president and Chinese officials plan to sign a long-sought initial piece of a trade agreement on Jan. 15. The deal will involve some tariff relief, increased Chinese purchases of U.S. agricultural goods and changes to intellectual property and technology rules.
· House passes resolution to limit Trump’s war powers against Iran
The House passed a resolution Thursday to curb President Donald Trump’s war powers against Iran as the president aims to navigate sharp tensions in the Middle East.
The Democratic-held chamber approved it by a 224-194 vote. Three Republicans and an independent voted for it, while eight Democrats opposed it.
Democrats, worried about conflict following the U.S. killing of Iran’s top general Qasem Soleimani last week, passed a measure to give Congress more oversight of White House military action against Tehran. The measure calls for Trump to stop military force against Iran within 30 days if he does not have congressional approval.
· U.S., Iran ease fear of conflict but threats keep tension high
Iran spurned U.S. President Donald Trump’s call for a new nuclear pact and its commanders threatened more attacks as the Middle East remained on edge following the U.S. killing of an Iranian general and Tehran’s retaliatory missile strikes.
Potentially stepping up international pressure on Tehran, U.S. officials said they believed a Ukrainian passenger plane that crashed in Iran was brought down accidentally by Iranian air defenses hours after Iran launched its missiles attacks.
Iran denied the reports of missiles downing the plane.
· Iran missile shot down Ukraine-bound Boeing airliner, officials say
An Iranian surface-to-air missile brought down a passenger plane bound for Kyiv, Ukraine, shortly after takeoff from Tehran this week, killing all 176 people on board, officials from the U.S., Canada and the U.K. said Thursday, citing new intelligence.
“This may well have been unintentional,” Canadian Prime Minister Justin Trudeau told a news conference, urging the Iranian government to ensure a “thorough investigation” of the crash.
· The World Bank has warned of the risk of a fresh global debt crisis, urging governments and central banks to recognize that historically low interest rates may not be enough to offset another widespread financial meltdown.
In its biannual Global Economic Prospects (GEP) report, published late Wednesday, the Washington D.C.-based group said there have been four waves of debt accumulation over the last 50 years.
The current wave — which started in 2010 — is thought to be “the largest, fastest and most broad-based increase” in global borrowing since the 1970s.
· Japanese household spending fell for a second straight month in November, government data showed on Friday, reflecting a pullback in private consumption after the October sales tax hike, although the pace of decline slowed.
Household spending fell 2.0% in November from a year earlier, bigger fall than a median forecast for a 1.7% decline.
It tumbled 5.1% in October, the biggest fall since March 2016 when spending fell 5.3%.
From the previous month, it rose 2.6%, which compared with the median estimate for a 3.4% month-on-month gain and was a rebound from the steep 11.5% monthly drop in October.
Japan raised the sales tax to 10% from 8% on Oct. 1, a move that is seen as critical for fixing the country’s tattered finances.
But recent weak data on exports and factory output as well as impacts from the tax hike suggest the economy could shrink in the fourth quarter.
· Oil eases as focus shifts from Iran tensions to U.S. crude build
Oil prices retreated further on Thursday, adding to sharp losses in the previous session as the market shifted focus toward rising U.S. crude stocks and away from worries about the conflict between the United States and Iran. Broadly, prices were moving back toward where they stood before a Jan. 3 U.S. drone strike killed a top Iranian general, prompting an Iranian rocket attack on Iraqi air bases hosting U.S. forces. These events pushed crude to its highest in four months.
After falling 4.1% on Wednesday, Brent crude futures settled down 5 cents at $65.37 a barrel. West Texas Intermediate fell 7 cents to $59.56 after sliding nearly 5% the previous day.
The build, reported on Wednesday by the Energy Information Administration, shocked the market after analysts forecast a drop of 3.6 million barrels.
JPMorgan analysts maintained their forecast for Brent to average $64.50 a barrel this year.
Reference: CNBC, Reuters
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