• The dollar reached a 16-month high against a basket of currencies on Monday as investors built bets on a Federal Reserve interest rate increase next month, and political risks in Europe put pressure on the euro and the pound.
Fears about a no-deal Brexit and a growing rift in Europe over Italy’s budget have also boosted the dollar.
Last Tuesday’s U.S. elections produced a split control of Congress that suggested more fiscal stimulus measures are unlikely, sparking a wave of selling in the dollar.
The greenback has since recovered on the Fed’s signal that it would hike key lending rates further as the U.S. economic expansion remains on track.
Net long positions on the dollar versus G10 currencies last week rose to their highest levels since 2015 at $30.4 billion, according to CFTC data.
• An index that tracks the dollar against the euro, yen, sterling and three other currencies was up 0.64 percent at 97.527. It reached 97.578 earlier Monday, which was the highest since June 2017.
The dollar index’s rise was capped by a sharp selloff on Wall Street where the S&P 500 lost 1.21 percent.
U.S. trading was muted by the U.S. Veterans Day holiday. While Wall Street and currency markets were open for business, the U.S. bond market was closed.
• Sterling fell as doubts grew over Prime Minister Theresa May’s ability to get the backing of the EU and her own party for any Brexit deal.
With less than five months before Britain is due to leave the EU on March 29, negotiations are still stuck over how to prevent a return to a hard border between British-ruled Northern Ireland and EU member Ireland.
The pound was down 0.98 percent at $1.2852 and the euro was marginally lower against the pound at 87.455 pence.
• The euro was knocked back by concerns about Rome’s tension with the European Commission over its 2019 budget and weakness in Italy’s banking sector.
The single currency fell 0.82 percent versus the dollar to its lowest since June 2017 at $1.124.
• With the U.S. economy at or beyond full employment and inflation likely to rise slightly above a 2 percent goal over the next year, the Federal Reserve should continue to raise rates gradually, its newest policymaker said Monday — but not necessarily next month.
“My modal forecast is for two to three (rate hikes) over the next period of time, with the exact timing not being certain,” Mary Daly told reporters after her first formal economic outlook speech as San Francisco Fed president, a job she started last month.
• British Prime Minister Theresa May’s Brexit strategy came under attack from all sides on Monday, putting in doubt her ability to steer any agreement through parliament and raising the risk of a disruptive “no-deal” exit from the European Union next March.
In a sign that Brexit talks could go down to the wire, EU sources said they want clarity from London by the end of Wednesday at the latest if there is to be a summit this month to approve a Brexit deal.
Britain’s main opposition Labour Party said it would try to force the government in a special vote on Tuesday to publish its legal advice on leaving the European Union, including on how the deal will handle the sensitive issue of the Irish border.
• More than a third of small- and medium-sized British companies think the pound is likely to fall sharply after the country leaves the European Union in March next year, a survey showed on Tuesday.
Businesses were not asked to specify whether their prediction related to sterling’s value against the dollar, the euro or a wider range of currencies.
A Reuters poll of analysts published at the end of October suggested the pound is likely to rise to around $1.34 by late April — a month after Britain exits the European Union — from roughly $1.29 now, so long as Britain and the EU agree a divorce deal.
By contrast, the poll showed a weakening to $1.20 could be on the cards in the event of a no-deal Brexit.
• Palestinians in Gaza fired scores of rockets and mortar bombs into southern Israel on Monday and Israel launched retaliatory air strikes, a day after an Israeli incursion prompted deadly fighting in the enclave.
Three Palestinian gunmen were killed in the air attacks, their factions said. Warplanes also destroyed the premises of Hamas’s Al-Aqsa Television, the Israeli military said.
On the Israeli side of the border, a guided missile wrecked a bus, wounding a soldier, and shelling struck several homes as residents fled to shelters, authorities said.
• U.S. crude prices fell for the 11th consecutive session, the most on record since the contract began trading, retreating from a rally early in the session as U.S. President Donald Trump said he hoped there would be no oil output reductions.
Trump’s comment followed remarks from Saudi Arabia’s energy minister saying OPEC was considering cutting supply next year, citing softening demand. Saudi Arabia has expressed concerns that U.S. sanctions have removed less oil from the market than expected.
U.S. benchmark West Texas Intermediate crude CLc1 fell 26 cents a barrel to settle at $59.93. The fall marked the 11th consecutive daily decline, the most since the contract began trading, according to data from CME Group. The contract continued to drop in post-settlement trading, falling $1.48 to $58.71 a barrel by 3:34 p.m. EST (1834 GMT).
Brent crude futures LCOc1 reversed course late in the session, settling down 6 cents at $70.12 a barrel. Brent also traded lower in post-settlement activity, dropping $1.13 to $69.05 a barrel.
• Electric vehicles and more efficient fuel technology will cut transportation demand for oil by 2040 more than previously expected, but the world may still face a supply crunch without enough investment in new production, the International Energy Agency (IEA) said on Tuesday.
Oil demand is not expected to peak before 2040, the Paris-based IEA said in its 2018 World Energy Outlook.
The IEA’s central scenario is for demand to grow by around 1 million barrels per day (bpd) on average every year to 2025, before settling at a steadier rate of 250,000 bpd to 2040when it will peak at 106.3 million bpd.
Reference: Reuters
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