· The dollar dropped for a fifth straight session on Thursday, pressured by softer-than-expected U.S. economic data and this week’s robust performance by the euro and the British pound.
The Federal Reserve, at its last monetary policy meeting, said it was on hold after cutting interest rates three times this year. But some analysts suggested the Fed could reconsider that stance if U.S. economic data continues to underwhelm.
“You’re looking at concerns that the U.S. economy is yet again slowing down just based on some poor numbers out of both ISM (Institute for Supply Management),” said Joe Trevisani, senior analyst at FXStreet.com.
Most currencies traded in tight ranges after conflicting headlines on whether a U.S.-China trade agreement can be reached before Dec. 15, when additional U.S. tariffs kick in on Chinese goods.
The focus was also on how much damage the trade war is causing.
German industrial orders fell unexpectedly in October, data showed.
U.S. reports such as weekly jobless claims and the trade deficit were mostly better than expected, but they are second-tier data and did not move the dollar much.
Manufacturing activity in the euro zone beat expectations.
In afternoon trading, the dollar index was down 0.2% at 97.43654 .DXY.
The euro EUR= rose 0.2% versus the dollar to $1.1102, while the dollar slipped 0.1% against the yen to 108.76 yen JPY=.
· UBS, in a research note, said the dollar could come under pressure next year, as it expects the United States to contribute less to global demand growth.
“The European economy and European exporters in particular should benefit if trade tensions subside. In such an environment, the euro/dollar exchange rate has clear upside potential.” the bank said.
· The U.S. and China are still at odds over the size of Chinese agriculture purchases, The Wall Street Journal reported Thursday.
President Donald Trump is asking China to buy $40 billion to $50 billion of farm goods a year, which is significantly higher than the $8.6 billion the country bought last year, the Journal said, citing people familiar with the discussions. The administration is also demanding that China publicly announce its purchasing plans and say that they wouldn’t depend on market conditions or China’s trade obligations, sources told the Journal.
The two countries are in talks to finalize a so-called phase one trade deal as 15% tariffs on $165 billion in Chinese imports are set to kick in Dec. 15.
· China’s official spokespeople are keeping quiet on trade talks with the U.S. amid growing uncertainty on when even a phase-one agreement can be reached.
“China believes if both sides reach a phase-one agreement, relevant tariffs must be lowered,” Gao Feng, Ministry of Commerce spokesman, said Thursday, according to a CNBC translation of his Mandarin-language remarks.
The comments reiterated the position Beijing has expressed in the last few weeks, since both countries indicated a rollback of tariffs would be part of a so-called phase-one agreement.
On Thursday, Gao noted both trade delegations remain in communication, but disclosed few additional details about the negotiations.
· Treasury Secretary Steven Mnuchin on Thursday agreed that the World Bank should expel China from a supportive loan program that helps middle- and low-income nations finance government projects.
Mnuchin added that the selection of former Treasury Undersecretary David Malpass as the World Bank’s president earlier this year gives him confidence the institution will revise its practices to make its lending more equitable.
“What’s happening is basically the U.S. and other countries are indirectly funding China’s ‘Belt and Road’ ambitions, which used to further their geopolitical goals,” said Clete Willems, a partner at Akin Gump and a former White House trade advisor.
“China claims that it wants to be seen as an equal to the U.S. in the global economy. If that’s the case, it needs to step up and be treated in the same way as the U.S.,” Willems added. “It can no longer be considered a developing country.”
· Global growth will recover in the second half of 2020 as the trade war between Washington and Beijing eases and central banks’ monetary policies come into effect said Adrian Zuercher, APAC head of asset allocation at UBS Global Wealth Management’s Chief Investment Office.
“There is a lot of fog around trade, influencing our forecast for economic growth,” Zuercher told CNBC’s “Street Signs” on Thursday. Tariffs the U.S. and China have imposed on each other are among the firm’s “key risks,” said Zuercher.
But while the environment is currently slow, he said global growth will see a “significant recovery going into the second half of 2020, particularly in the fourth quarter.”
· The House released a sweeping impeachment report Tuesday outlining evidence of what it calls President Donald Trump’s wrongdoing toward Ukraine, findings that will serve as the foundation for debate over whether the 45th president should be removed from office.
The 300-page report from Democrats on the House Intelligence Committee makes the case that Trump misused the power of his office and, in the course of their investigation, obstructed Congress by stonewalling the proceedings. Based on two months of investigation, the report contains evidence and testimony from current and former U.S. officials.
“The impeachment inquiry has found that President Trump, personally and acting through agents within and outside of the U.S. government, solicited the interference of a foreign government, Ukraine, to benefit his reelection,” said Chairman Adam Schiff in the report’s preface.
· The Hong Kong government on Wednesday evening announced an additional 4 billion Hong Kong dollars ($511 million) in economic stimulus, bringing the total boost to 25 billion Hong Kong dollars (about $3.2 billion).
It was the city’s fourth economic support package in last four months, much of which goes to help tourism, retail and transport.
The Hong Kong government is keeping an open mind to additional measures that will help support the city’s economy, Edward Yau, the city’s secretary for commerce and economic development, said on Thursday.
“Hong Kong is of course hit doubly by a sort of twin cycle — U.S.-China trade war and also the local unrest; I think the enterprises are hard hit,” Yau told CNBC’s “Street Signs.”
· Oil futures were steady to slightly firmer on Thursday despite OPEC and its allies planning one of the deepest output cuts this decade to prevent oversupply.
The deal would apply for an unexpectedly short period of the first three months of 2020, without an extension that the markets had been eyeing, and would exclude condensates from the cuts for the non-OPEC allies, like Russia.
Brent crude LCOc1 futures settled at $63.39 a barrel, up 39 cents or 0.6%. West Texas Intermediate (WTI) crude CLc1 futures ended at $58.43 a barrel, unchanged from the previous settlement, after hitting the highest since late September earlier in the session.
· A ministerial panel of key members of the Organization of the Petroleum Exporting Countries and allied producers led by Russia, known as OPEC+, recommended deepening output cuts by 500,000 barrels per day (bpd) in the first quarter of 2020, according to Russian Energy Minister Alexander Novak.
OPEC+ has agreed to voluntary supply cuts since 2017 to counter booming output from United States, now the world’s top producer. Existing supply curbs of 1.2 million bpd are set to expire in March. A cut of 1.7 million bpd would amount to 1.7% of global supply.
The OPEC ministers gathered on Thursday in Vienna and OPEC+ will meet again on Friday to vote on the deal.
Reference: CNBC, Reuters, The Time
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