• MTS Economic News_20171212

    12 Dec 2017 | Economic News


· The dollar held firm near two-week highs versus a basket of major currencies on Tuesday, with traders awaiting the U.S. Federal Reserve’s policy meeting this week for fresh catalysts.

The dollar index, which tracks the greenback against a basket of six major peers, inched up 0.1 percent to 93.931. That was within sight of Friday’s peak of 94.087, the highest since Nov. 21.

The Fed is widely expected to raise interest rates at its two-day policy meeting that will end on Wednesday and is expected to tighten policy further next year.

Most economists polled by Reuters now expect three more rate rises next year compared with two when surveyed just weeks ago, although the outlook remains clouded by stubbornly subdued inflation.

Against the yen, the dollar eased 0.1 percent to 113.48 yen, after having risen to as high as 113.69 yen on Monday, the dollar’s strongest level in about a month.

The euro last changed hands at $1.1771, having pulled back from Monday’s intraday high of $1.1811.

· Virtual currency bitcoin dipped slightly from the previous session’s record highs on Tuesday, after a month of whirlwind and volatile gains leading up to the launch of bitcoin futures on the weekend.

Bitcoin was quoted at $16,390 on the Luxembourg-based Bitstamp exchange, down half a percent or $80 from its previous close.

The world’s biggest and best-known cryptocurrency hit a record high of $17,270 on Monday, registering a nearly twenty-fold increase in its price for the year as it drew in millions of new investors.

· Republican U.S. Senator Susan Collins, whose support was crucial in passing the Senate tax reform bill earlier this month, said on Sunday she has not yet decided whether she will back the final measure negotiated by House and Senate leaders.

· The U.S. Treasury Department on Monday released a one-page analysis of the economic and fiscal impact of a Republican tax overhaul plan that was swiftly criticized by a number of tax experts and attacked as “fake math” by Democrats.

Treasury said the tax plan would more than pay for itself in 10 years, basing its forecast on a 2.9 percent annual economic growth assumption, a level well above most economists’ expectations, as well other changes on which the White House has made little progress.

· Japan’s wholesale prices rose an annual 3.5 percent in November, the fastest rate in nine years, the Bank of Japan said, in a sign that rising global commodity costs were driving up corporate expenses.

Analysts say it is uncertain whether household spending is resilient enough to allow firms to pass the higher costs on to consumers, but Tuesday’s data may offer some hope that consumer inflation could be headed towards the central bank’s 2 percent target.

· Prime Minister Theresa May hailed “a new sense of optimism” in Brexit talks, telling parliament on Monday an agreement to move negotiations on to future trade ties is progress and will reassure those concerned Britain may leave with no deal.

· The Fed is expected to raise interest rates Wednesday, but it's how the Fed responds to the tax bill that is the wild card for markets.

Many strategists and economists expect the Fed to leave its interest rate forecast in place, but there's a case to be made that Fed officials could acknowledge the tax bill could create stimulus, bumping their outlook for GDP and interest rates. One argument against that is that it is the last meeting for Fed Chair Janet Yellen, and the Fed may stick with the status quo ahead of the expected transition to Jerome Powell as Fed chair early next year.

"The surprise we have to look for is how the Fed may interpret tax changes going forward. They've had three rate hikes for 2018. Does this move them to four? There's a very low threshold to move up to four hikes. It just takes three voters. That's really what people are going to focus on," said Jim Caron, portfolio manager and fixed income strategist at Morgan Stanley Investment Management.

Even before Yellen's departure, the makeup of the Fed is changing, as are the voting members for next year, and the market expects to hear a slightly more hawkish majority.

· Brent oil prices jumped 1.5 percent on Tuesday to their highest since mid-2015, after the shutdown of the Forties North Sea pipeline knocked out significant supply from a market already tightening due to OPEC-led production cuts.

Brent crude futures, the international benchmark for oil prices, were at $65.63 a barrel at 0556 GMT, up 94 cents, or 1.5 percent, from their last close.

That marks the first time Brent has risen above $65 since June, 2015.

U.S. West Texas Intermediate (WTI) crude futures were at $58.41 a barrel, up 42 cents, or 0.7 percent, from their last settlement.


Reference: Reuters, CNBC

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