· The euro slipped to a two-month low on Wednesday, as markets waited to gauge the European Central Bank’s stance on policy amid bubbling expectations that it could eventually lower interest rates and join the global easing trend.
The common currency was 0.05% lower at $1.1145 after touching $1.1143, its lowest since May 31. It had already lost more than 0.5% the previous day and shed nearly 0.7% so far this week.
· The euro’s decline has quickened ahead of the ECB’s policy meeting on Thursday. While markets have pared their bets the central bank would cut rates by 10 basis points, they still expect dovish guidance, paving the way for easing in September.
The euro was also seen weighed down as the pound slumped toward a two-year low after Boris Johnson on Tuesday won the contest to be the next British prime minister and raised the specter of a no-deal Brexit.
Sterling was a touch lower at $1.2433, on track for its fourth straight day of losses and edging closer to $1.2382, the two-year trough brushed last week.
· The greenback also firmed after Washington on Tuesday reached a deal to lift government borrowing limits. Analysts reckon increased U.S. borrowing would tighten the supply of money in the country’s banking system and in turn support the dollar.
The dollar index edged up to a five-week high of 97.755, following gains of nearly 0.5% the previous day.
· The #USDollar rose despite an uptick in Fed rate cut bets ahead of the July #FOMC meeting after the @IMFNews published a gloomy outlook for global growth.
· The International Monetary Fund on Tuesday cut its forecast for global growth this year and next, warning that further U.S.-China tariffs or a disorderly exit for Britain from the European union could further slow growth, weaken investment and disrupt supply chains.
The IMF said downside risks had intensified and it now expected global economic growth of 3.2% in 2019 and 3.5% in 2020, a drop of 0.1 percentage point for both years from its April forecast, and its fourth downgrade since October.
Economic data so far this year and softening inflation pointed to weaker-than-expected activity, the global lender said, with trade and technology tensions and mounting disinflationary pressures posing future risks.
The IMF slashed its forecast for growth in global trade by 0.9 percentage point to 2.5% in 2019. Trade should rebound and grow by 3.7% in 2020, about 0.2 percentage point less than previously forecast.
Trade volume growth declined to around 0.5% in the first quarter, its slowest pace since 2012, it said, with the slowdown mainly hitting emerging Asian countries.
Global trade volumes fell 2.3% between October and April, the sharpest six-month decline since 2009, when the world was in the midst of the Great Recession, according to estimates by the Netherlands Bureau of Economic Policy Analysis (CPB).
· BlackRock has closed its “underweight” position in European equities and credit, and upgraded European government bonds to “overweight,” in anticipation of a “decisively dovish” shift in policy from the European Central Bank (ECB).
Analysts with the world’s largest asset manager anticipate that Thursday’s monetary policy meeting will lay the foundations for the ECB to deploy a fresh stimulus package in the coming months, against a backdrop of a “stabilizing growth outlook and persistent inflation undershoots.”
· Tax cuts could end up supporting economic growth in China, even if Beijing’s trade war with the U.S. doesn’t improve, according to the chief economist of a Chinese investment banking firm.
The U.S. and China have been locked in a tariff battle since early 2018 and both economies have levied sanctions on each other’s imports. Earlier this month, China said its second-quarter GDP growth was 6.2%, its slowest quarterly rate in 27 years. Still, Liang Hong, chief economist of widely followed China International Capital Corporation said the government has done “enough” to support the economy.
· U.S. national security adviser John Bolton met with South Korean officials on Wednesday to discuss major bilateral issues amid South Korea’s trade spat with Japan, stalled nuclear talks with North Korea, and a regional air space dispute on Tuesday.
Bolton met South Korea’s chief of National Security Office Chung Eui-yong, Defence Minister Jeong Kyeong-doo, and Foreign Minister Kang Kyung-wha in Seoul to discuss issues including denuclearisation of the Korean Peninsula and ways to strengthen the South Korea-U.S. alliance.
· South Korea said on Wednesday a Japanese plan to remove South Korea from a Japanese list of countries that face minimum trade restrictions would impose tougher conditions without legitimate grounds and consultation.
Japan’s plan to remove South Korea from the so-called white list was a very grave matter that undermined the economic and security partnership between the two countries, South Korea’s industry ministry said in a statement.
· German lender Deutsche Bank reported a weaker-than-expected net loss of 3.15 billion euros ($3.51 billion) for the second quarter of 2019.
Analysts polled by research firm Refinitiv had estimated a net loss of 1.7 billion euros for the period, due to the bank’s massive restructuring program announced earlier this month. The German bank itself had previously said it expected to report a net loss of 2.8 billion euros for the quarter.
· Nissan Motor Co Ltd (7201.T) plans to expand job cuts to over 10,000 to help turn around its business, a person with direct knowledge of the matter said on Wednesday, as profit continues to plunge while the automaker grapples with management upheaval.
The global plan includes the 4,800 job cuts announced in May and will mostly be at factories overseas with low utilization rates, the person said. It will be announced along with financial results on Thursday, said the person, who declined to be identified as the information was still private.
Nissan declined to comment on the job cuts. Its shares ended the day up nearly 1.0%.
· Russian told South Korea that an equipment malfunction led its military aircraft into an unintended area on Tuesday, South Korea’s Yonhap news agency reported, citing the South Korean presidential office.
A Russian military officer told a South Korean defense official on Tuesday that the Russian military aircraft, which South Korea fired warning shots at for entering South Korean airspace, appeared to have “entered an area that was not planned due to device malfunction”, Yoon Do-han, a senior official in the South Korean presidential office, said.
· Britain has sent a mediator to Iran to discuss the freeing of a British-flagged tanker seized by the Islamic Republic last week, the head of the Supreme Leader’s office said on Wednesday, according to the semi-official Tasnim news site.
Mohammad Mohammadi-Golpayegani provided no details about the British mediator’s trip but made an ironic reference to Britain’s involvement during colonial times in Iranian affairs.
· Oil prices nudged higher on Wednesday on rising tensions over Iran, a sharp fall in U.S. crude stocks and positive signs on Sino-U.S. talks, although worries about weak demand kept a cap on gains.
Brent crude futures LCOc1 were up 21 cents, or 0.3%, at $64.04 a barrel by 0719 GMT, after rising nearly 1% on Tuesday.
U.S. West Texas Intermediate crude CLc1 was up 28 cents, or 0.5%, at $57.05 a barrel, having risen about 1% in the previous session.
U.S. crude stocks fell more than expected in the week to July 19, declining by 11 million barrels to 449 million, the trade group American Petroleum Institute said on Tuesday.
That compared with analysts’ expectations of a decrease of 4 million barrels.
· CRUDE OIL TECHNICAL ANALYSIS
Crude oil prices are digesting losses above support at 54.84, with a modest bounce retracing a bit of recently lost ground. Immediate resistance is capped at 58.19, with a break above that opening the door to retest the 60.04-84 area. Renewed selling pressure that pierces support probably targets the 49.41-50.60 zone next.
Reference: Reuters, CNBC, FX Street
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