• The yen rose against the dollar and euro on Thursday as investors sought the perceived safety of the Japanese currency after a surprise revenue warning from Apple Inc exacerbated concerns about a Chinese and global economic slowdown.
Data showing U.S. manufacturing activity slowed sharply to a two-year low in December, and a drop in two-year Treasury debt yield below a key Federal Reserve rate, the first such occurrence since 2008, exerted further pressure on the greenback.
The dollar was 1.18 percent lower against the yen at 107.59 yen, while the euro was 0.73 percent lower against the yen.
• The U.S. two-year Treasury note yield US2YT=RR dropped below 2.4 percent on Thursday afternoon, reaching parity with the federal
In late afternoon trade, the three- US3YT=RR and five-year US5YT=RR note yields had also dropped below 2.4 percent.
The fed funds effective rate, which was 2.4 percent on Thursday, moves within the Federal Reserve’s key policy range of 2.25 to 2.5 percent. The market move suggests investors believe the U.S. central bank will not be able to continue to tighten monetary policy as its forecast suggests, after having lifted benchmark interest rates four times in 2018.
“This is a big deal,” said Ian Lyngen, head of U.S. rates strategy at BMO Capital Markets.
“The market is effectively saying that at some point in the next 24 months, the Fed is going to have to not only stop
• Investors are hoping a strong December jobs report and dovish words from the Federal Reserve chairman will ease rising concerns about an economic slowdown.
The Powell appearance has been widely anticipated in markets, even though many economists do not expect him to provide much new insight into policy. Powell's last appearance was at the briefing following the Fed's rate meeting in December, and he spooked markets when he said that the Fed's policy of winding down its balance sheet was on "
Investors have been speculating that Powell could send a dovish message to intentionally reverse the impression he gave after the rate hike.
Markets have been concerned that the Fed is heading for a policy mistake, of tightening too much in a too-weak economy.
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• This is a chance for Powell to further shift the Fed narrative and clearly signal a pause. He could do something like Kaplan floated today and say no moves through Q2 or go further with an indefinite pause.
The market is taking it a big step further. The Fed funds futures market is now pricing in a 40% chance of a rate cut by the end of this year.
• Democrats wasted no time flexing their new power in the U.S. House of Representatives on Thursday as they maneuvered to pass legislation backed by new Speaker Nancy Pelosi that would end a 13-day partial government shutdown while ignoring President Donald Trump’s demand for $5 billion for a border wall.
• Weak sales at Apple and Cargill, U.S. giants of technology and agriculture, may be the clearest sign yet that President Donald Trump’s quest to reset world trade carries costs at home and could isolate the United States as the increasingly fragile engine for global economic growth.
• The Trump administration is considering Jim Webb, a former Democratic senator who also served as Navy secretary under Republican President Ronald Reagan, to be the next defense secretary, the New York Times reported on Thursday.
The Times said Webb could potentially allow Trump to bypass “more hawkish Republicans whose names have been floated to replace Jim Mattis.”
• Oil prices rose more than 1 percent on Thursday in volatile trade, drawing support from signs that Saudi Arabia is cutting crude output but pressured by concerns that slowing global economic growth could dent demand.
Brent crude LCOc1 futures gained $1.04 to settle at $55.95 a barrel, a 1.89 percent gain. U.S. West Texas Intermediate (WTI) crude CLc1 futures rose 55cents to settle at $47.09 a barrel, a 1.18 percent gain.
Prices traded in a wide range, with Brent hitting a session high of $56.30 a barrel and a low of $53.93 a barrel. WTI posted a session high of $47.49 a barrel and a low of $45.35 a barrel.
Reference: CNBC
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