• The Turkish lira remained under heavy pressure as the country’s currency crisis continued, providing a lift to the dollar and currencies viewed as havens.
The lira USDTRY, +0.1932% plunged to another all-time low against the U.S. dollar on Monday, breaching 7 lira per dollar for the first time on record, after surpassing both the 5- and 6-lira benchmarks last week. One dollar last bought 7.088 lira, up from 6.4275 lira late Friday in New York. On Friday last week, the currency dropped16% against the buck, according to Dow Jones Data Group, as Turkey’s problems culminated in a currency crisis.
The ICE U.S. Dollar Index DXY, -0.01% last edged back up 0.1% to 96.418, after gaining 1.3% last week. It notably remained above the key level of 96 all day.
Investors also turned their attention to the EURUSD, -0.0438% which last bought $1.1387 compared with $1.1412 late Friday.
• “The euro has broken through $1.15, which was a key level,” said Brad Bechtel, managing director in FX at Jefferies, adding that $1.1370 was the next technical level to watch for the eurozone currency. If it fell below, the bottom would be wide open.
• President Tayyip Erdogan on Monday accused “economic terrorists” of plotting to harm Turkey by spreading false reports and said they would face the full force of the law, as authorities launched investigations of those suspected of involvement.
The interior ministry said it had so far identified 346 social media accounts carrying posts about the exchange rate that it said created a negative perception of the economy. It said it would take legal measures against them but did not say what these would be.
• U.S. economic growth will probably accelerate this year before slowing in 2019 to well below the Trump administration’s 3 percent target as a fiscal stimulus fades, congressional researchers projected on Monday.
In an updated economic outlook, the nonpartisan Congressional Budget Office (CBO) projected that inflation adjusted or real gross domestic product (GDP) would grow 3.1 percent this year, exceeding 2.2 percent growth in 2017 due to lower income taxes, increased government spending and private investment.
The government slashed corporate and personal income taxes in January in a $1.5 trillion package and the U.S. Congress passed a $1.3 trillion spending bill in March.
This has buoyed consumer and business spending as well as government outlays, which combined with accelerated soybean exports to lift the economy to a 4.1 percent annualized rate in the second quarter from a 2.2 percent pace in the January-March period. The April-June growth rate was the highest in nearly four years.
But the CBO said it expected growth to slow in the second half as jolts to consumer spending and agricultural exports either fade or reverse. For instance, some second-quarter soybean exports were aimed at beating Chinese tariffs that took effect in July and cut future shipments.
“In 2019, the pace of GDP growth slows to 2.4 percent in the agency’s forecast, as growth in business investment and government purchases slows,” CBO director Keith Hall said in a statement.
• U.S. President Donald Trump signed a $716 billion defense policy bill on Monday that authorizes military spending and includes watered-down controls on U.S. government contracts with China’s ZTE Corp and Huawei Technologies Co Ltd.
• China’s Commerce Ministry said on Tuesday it will comprehensively assess a new U.S. defense act that strengthens the role of a key committee tasked with reviewing proposed foreign investment, and called for fair treatment of Chinese investors.
• Oil prices fell on Monday after data suggested inventories at the U.S. crude delivery hub rose in the latest week, compounding worries that troubled emerging markets and trade tensions will dent the outlook for fuel demand.
Brent crude futures LCOc1 dipped 20 cents, or 0.3 percent, to settle at $72.61 a barrel, while U.S. West Texas Intermediate (WTI) crude CLc1 declined 43 cents to settle at $67.20 a barrel, with a 0.7 percent loss.
Reference: Reuters, Market Watch
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