· The dollar rallied from a two-week low on Tuesday as a sell-off in world stock markets spurred safe-haven bids and investors worried about slowing global growth.
Other safe-haven currencies such as the yen and Swiss franc gained as well.
· “Dovish comments from the Fed that the world economy may be cooling off has dented investors’ sentiment,” said Viash Sreemuntoo, corporate trader at online FX broker XE.
· In midmorning trading, the dollar index, a measure of its value against a basket of six major currencies, rose 0.3 percent to96.510, off its weakest level since Nov. 7.
· The euro also gave up its gains, spooked by a slide in European equities. Italian bank shares hit a two-year low and Italian bonds sold off again amid a continuing confrontation with the European Union over Rome’s budget plans.
Europe’s single currency was last down 0.4 percent at $1.1401, off a two-week high earlier.
· U.S. Treasury debt prices were higher Tuesday morning as investors fled volatile equity markets in favor of the relative safety of government debt.
· Sterling rebounded off earlier lows on Tuesday after Bank of England Governor Mark Carney gave his backing to a Brexit deal struck by prime minister Theresa May though gains were tiny in a market wary of further Brexit deal developments.
· Speaking to lawmakers, Carney and other BoE officials speaking alongside him repeated their warning to investors not to assume that the central bank would respond to a no-deal shock by cutting interest rates, as it did after the Brexit referendum in 2016.
“Carney’s comments did not deviate much from what they have said earlier so that helped sentiment a bit but concerns remain high,” said Fritz Louw, a currency analyst at MUFG in London.
The pound rebounded 0.1 percent to $1.2856, and 0.3 percent above a low of $1.2821. It hit a two-week low of $1.2725 reached last week. Its weakness was less than some of its peers — the euro fell 0.4 percent against the Swiss franc.
· U.K. Prime Minister Theresa May is set to meet the European Commission President Jean-Claude Juncker on Wednesday afternoon, hoping to strike a rough agreement on the future links between the U.K. and the EU.
The future relationship is the focus at the moment in Brussels, while Westminster is still being bogged down by the country's exit agreement.
Reporters in the Belgian capital are waiting for the publication of a draft plan that will be fundamental once the U.K. leaves the EU in March of next year. After March 29, the official Brexit date, the U.K. and the European Union will negotiate their future ties including new trading arrangements. However, the aim is to agree on the basis for those talks before a special Brexit summit this Sunday.
Margaritis Schinas, chief spokesperson for the European Commission, said Tue sday that the aim of Wednesday's meeting is to prepare for Sunday's summit, when the other 27 EU leaders and May are due to endorse the exit agreement as well as the so-called political declaration on the future relationship. However, the European institutions have yet to confirm when that important political text will be published on Tuesday.
· JP Morgan economists expect economic growth to slow down in 2019, to a pace of 1.9 percent for the year.
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The economist say the slow down from a "boomy" 3.1 percent in year-over-year fourth quarter growth will come as fiscal, monetary and trade policy get less supportive or more restrictive.
But even with slower growth, wages will continue to rise as the labor market tightens.
"We see the Fed needing to exert modest restraint on growth, hiking four times to 3.25 to 3.50 by year-end," said the economists. The Fed's current forecast is for three interest rate hikes next year, and one more this year, in December.
The economists expect that growth will hold above 2 percent in the first and second quarter, at 2.2 and 2 percent respectively, before falling to 1.7 percent in the third quarter and 1.5 percent in the fourth quarter. The economy last grew at less than 2 percent in the first quarter of 2017.
· President Donald Trump once again took a shot at the Federal Reserve on Tuesday, saying he would like to see lower rates from the U.S. central bank in answering a question on the state of the economy and financial markets.
"I'd like to see the Fed with a lower interest rate. I think the rate's too high. I think we have much more of a Fed problem than we have a problem with anyone else," Trump said to reporters outside the White House. "I think your tech stocks have some problems."
President Donald Trump has submitted answers to written questions posed to him by special counsel Robert Mueller's office, Trump's legal team announced Tuesday.
Neither the questions from Mueller, nor the answers Trump gave the special counsel, were made public.
· President Donald Trump vowed on Tuesday to remain a “steadfast partner” of Saudi Arabia despite saying that Saudi Crown Prince Mohammed bin Salman may have known about the plan to murder dissident journalist Jamal Khashoggi last month.
Defying intense pressure from U.S. lawmakers to impose tougher sanctions on Saudi Arabia, Trump also said he would not cancel military contracts with the kingdom. He said it would be a “foolish” move that would only benefit Russia and China, competitors of the United States in the arms market.
· Oil prices plummeted as much as 7 percent on Tuesday, snapping four days of gains and renewing a sell-off that has plunged crude futures into a bear market.
The renewed selling in the energy complex dovetailed with a sharp pullback in the stock market. The Dow Jones Industrial Average was down more than 500 points, after posting a nearly 400-point loss in the previous session.
Crude futures and equities fell in tandem during a broad market sell-off last month that saw investors dump risk assets.
· "The next fear is that as the equities fall as a reflection of slowing economic growth, that's going to depress any growth in oil demand," said Andrew Lipow, president of Lipow Oil Associates.
· U.S. West Texas Intermediate settled Tuesday's session down $3.77, or 6.6 percent, at $53.43. The contract fell as low as $52.77on Tuesday, its weakest price level since October 2017.
Brent crude dropped $4.43, or 6.6 percent, to $62.36 a barrel by 2:15 p.m. ET, after earlier falling to $61.71, a low going back to December 2017.
U.S. crude prices have now dropped as much as 31 percent from a four-year high last month. Brent has tumbled nearly 29 percent from its recent high.
Reference: CNBC, Reuters
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