· The dollar edged up on Thursday as many of its peers weakened after more central banks shifted to dovish policy stances amid a deteriorating global economic outlook.
The latest switch came from the Reserve Bank of New Zealand (RBNZ), which stunned markets on Wednesday by saying the next move in rates is likely to be down, joining a growing list of central banks that had turned dovish.
The dollar index against a basket of six major currencies was 0.1 percent higher at 96.879 and headed for its third day of gains.
· The euro was a touch higher at $1.1253. The single currency has still lost 0.45 percent this week with the benchmark 10-year bund yield having fallen to 2-1/2-year low of minus 0.09 percent.
The euro's upside was limited after European Central Bank President Mario Draghi said a hike in interest rates could be further delayed.
· The pound was flat at $1.3188 after going as low as $1.3143 earlier on Thursday.
Sterling was capped after an offer by British Prime Minister Theresa May to quit to get her European Union divorce deal through parliament failed to win over key opponents of the agreement.
Britain was supposed to leave the bloc on Friday but Brussels agreed last week to put back the divorce date until April 12 to give it a chance to resolve a three-year crisis that has split the country down the middle.
· U.S. government debt prices were higher on Thursday morning, as investors monitor Treasury auctions and a slew of economic data.
At around 3:25 a.m. ET, the yield on the benchmark 10-year Treasury note, which moves inversely to price, was lower at around 2.3611 percent, while the yield on the 30-year Treasury bond was also lower at 2.8082 percent.
Late last week, the yield on the 10-year U.S. Treasury bill fell below that of the 3-month note for the first time since 2007. It's a development that investors call an inverted yield curve and is seen as an early indicator of a recession.
A recent example is when the U.S. Treasury yield curve inverted in late 2005, 2006, and again in 2007 before U.S. equity markets collapsed. The curve also inverted in late 2018.
· US GDP DOWNGRADE MAY PROLONG RISK-OFF MOOD, HURT COMMODITIES
Looking ahead, a revised set of fourth-quarter US GDP figures is expected to put annualized growth at 2.3 percent, a downgrade from the prior estimate of 2.6 percent. A downside surprise echoing the soggy state of recent data flow may spur continued re-risking and extend yesterday’s price dynamics, with commodities broadly lower as sentiment sours and the Greenback gains.
· Fourth quarter GDP is unlikely to provide any surprise in its final revision. The weak retail sales figures, though odd, are already incorporated into the BEA figure. Business and consumer sentiment remained buoyant throughout the quarter and such attitudes should not have produced anything unexpected in economic activity.
· The Bureau of Economic Analysis (BEA) of the U.S. Department of Commerce will issue its second revision of annualized 4th quarter GDP on Thursday, March 28th at 8:30 am EDT, 12:30 GMT.
Forecast
Gross domestic product is projected to decline to 2.4% in the fourth quarter from its prior estimate of 2.6%. The range of estimates is 1.9% to 2.7%.
The BEA normally issues GDP three times, the initial estimate followed by two revisions. Due to the partial government closure in late December and January, the BEA combined the initial and first estimate. This is the second and final GDP figure for the fourth quarter.
US Economy
Economic growth peaked in the second quarter at 4.2%, dropped to 3.4% in the third and 2.6% in the estimate in the fourth. The decrease has continued into the first quarter of this year with current projections from the Atlanta Fed running at 1.3% and the New York Fed at 1.29%.
Consumer Sentiment
Consumer and business sentiment indicators declined in the second half of last year but remained strongly positive
The University of Michigan Consumer Sentiment Index peaked at 102.00 in March, had a second and lower top at 100.8 in September and slipped to 97.5 in December. The January plunge to 90.7 seems to have been shutdown-related with the recovery to 97.8 by March 2019 eliminating the January drop.
· The United States and China have made progress in all areas under discussion in trade talks, with unprecedented movement on the touchy issue of forced technology transfers, but sticking points remain, U.S. officials told Reuters on Wednesday.
U.S. Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin arrive in Beijing on Thursday for a new round of talks with Chinese officials to work out a deal that would end a months-long trade war.
The in-person talks, which will be followed by a round in Washington next week, are the first face-to-face meetings the two sides have held in weeks after working past an initial end-of-March goal for a summit between U.S. President Donald Trump and Chinese President Xi Jinping to sign a pact.
· China’s commerce ministry said on Thursday that Vice Premier Liu He will hold trade talks later tonight with U.S. trade representative Robert Lighthizer and Treasury Secretary Steven Mnuchin.
The talks are expected to last for a full day on Friday, ministry spokesman Gao Feng told reporters at a regular briefing.
Gao said both sides have achieved some progress during previous phone calls, but there remains much work to do.
· “U.S, China, we’re so closely joined at the hip economically, we got to get this thing done,” former U.S. ambassador to China Max Baucus says at the Boao Forum for Asia on Thursday.
“There’s some feeling here — maybe by the end of April, maybe a little longer — but we’ll get it done,” Baucus says, noting that otherwise U.S. stock markets and China’s economy would be negatively impacted.
For those reasons, Baucus said the fallout of talks between Trump and North Korean leader Kim Jong Un in late February should not be used as an example for how trade negotiations between the world’s two largest economies might end.
· It looks like Chinese negotiators are eager to get an agreement fully and tightly drafted before President Xi Jinping travels to the U.S. to sign it in the months ahead, said Jonathan Garner, Morgan Stanley’s chief equity strategist for Asia and emerging markets.
· Oil prices dropped on Thursday, extending losses into a second consecutive session, following a surprise build in U.S. crude inventories.
International Brent crude oil futures were at $67.56 a barrel at 0748 GMT, down 27 cents, or 0.4 percent, from their last close. Brent closed down 0.2 percent on Wednesday.
U.S. West Texas Intermediate (WTI) crude futures were at $59.09 per barrel, down 32 cents, or 0.5 percent, from their last settlement. WTI fell 0.9 percent on Wednesday.
“Today’s fall does not derail the short-term bullish argument that both the OPEC+ production cuts and supply outages will outweigh the global growth concerns and rising U.S. production,” said Edward Moya, senior market analyst, OANDA.
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