· The U.S. dollar index held steady on Monday before a heavy week of economic data, while sterling was the weakest performer after tepid growth increased the likelihood that the Bank of England will cut interest rates this month.
In the United States, consumer price data on Tuesday and retail sales data on Thursday are this week’s main U.S. economic focuses. The greenback weakened on Friday after U.S. job growth slowed in December.
The pound slipped after data on Monday showed Britain’s economy grew at its weakest annual pace in more than seven years in November.
On Sunday, another Bank of England policymaker, Gertjan Vlieghe, said he would vote for a rate cut this month unless economic data improved significantly.
The dollar index was at 97.35, after rising to 97.53. Sterling dropped 0.48% against the dollar to $1.2996, after falling as low as $1.2959.
The offshore Chinese yuan reached a 5-1/2-month high and the safe-haven Japanese yen dropped to a 7-1/2-month low as the imminent signing of a preliminary U.S.-China trade deal boosted sentiment.
The yuan hit a session high after Bloomberg News reported that the United States will lift its designation of China as a currency manipulator ahead of the trade deal. The U.S.-China Phase 1 agreement, due to be signed at the White House on Wednesday, marks the first step toward ending a damaging 18-month trade dispute between the world’s two largest economies.
· US removes China from currency manipulator list ahead of trade deal signing
China’s yuan has been rising, and it’s at more than a five-month high, as the U.S. is set to take back its claim that China has been intentionally driving its currency lower.
The U.S. will remove China from a list of countries considered currency manipulators, as the two countries come together this week to sign a phase one trade deal, a person familiar with the matter told CNBC. The Treasury Department formally made the designation five months ago, after U.S. officials complained that China was weakening its currency to claim an unfair trade advantage.
China’s currency is at the highest level to the dollar since Aug. 1. The onshore currency, which trades in China, was at 6.8792. The offshore currency, which trades in Hong Kong and is more impacted by international traders, was at 6.8792 to the dollar, its highest level since July 29.
CNBC reported earlier on Monday that the U.S. would make the move, citing a person familiar with the matter. The S&P 500 rose to a record high after reports from that the Treasury Department will no longer list China as a manipulator.
· For all the pomp and circumstance expected of the signing ceremony, many are still unsure of exactly what the two nations are agreeing to and how they’ll enforce their deal.
Corn options broker P.J. Quaid says “people have become pessimistic because a lot of the purchases [China] said they’re going to make seem hard to attain.”
But the fact that Beijing is willing to crack down on policies concerning forced technology transfer is key, says former White House trade advisor Clete Willems.
· The U.S. fiscal deficit topped $1 trillion in 2019, the first time it has passed that level in a calendar year since 2012, according to Treasury Department figures released Monday.
The budget shortfall hit $1.02 trillion for the January-to-December period, a 17.1% increase from 2018, which itself had seen a 28.2% jump from the previous year.
President Donald Trump had vowed that his stimulus policies, including massive corporate tax cut and aggressive deregulation, would help stem the red ink coming from Washington, but it has only increased. As deficits have swelled, so has the national debt, which is now at $23.2 trillion.
· Oil prices fell more than 1% on Monday as Middle East tensions eased and investors turned their focus to lackluster seasonal demand following last week’s bearish U.S. report showing a large fuel stockbuild.
Brent crude fell 78 cents, or 1.2%, to settle at $64.20 per barrel, while West Texas Intermediate crude fell 1.6%, or 96 cents, to settle at $58.08, its lowest settle since Dec. 3. WTI also dipped below its 50-day moving average for the first time since Dec. 3, and closed below its 50-day moving average for the first time since Nov. 29.
Reference: CNBC, Reuters
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