· The euro fell to a five-day low against the dollar Monday as investors remained convinced the European Central Bank would introduce a new wave of monetary policy stimulus at its meeting on Thursday.
Leveraged funds have increased their net short positions on the euro, expecting the ECB to cut interest rates, announce it will buy government bonds or other European assets, or both.
Other global central banks are already loosening monetary policy, including the People’s Bank of China, which on Friday cut the amount of cash that banks must hold as reserves.
“ECB watchers are confident there could be a 20 bps cut and so the potential surprise (for the euro) on the rate cut isn’t that big,” said Esther Maria Reichelt, a Commerzbank analyst.
The euro was neutral against the dollar in early London trade at $1.1033. It slipped to $1.10155 overnight, its weakest since Sept. 4.
Hedge funds have added more short euro positions, taking the amount of contracts to $6.74 billion in the week to Sept. 3, the highest in a month, though positions were not as big as in April.
The dollar index, which tracks the U.S. currency against six other currencies, was flat at 98.438. The dollar was confined to a narrow range against the yen as traders weighed the prospect of U.S. rate cuts against their demand for safe-haven assets. Dollar/yen was last flat at 106.93.
The Federal Reserve will continue to act “as appropriate” to sustain the U.S. economic expansion, Fed Chair Jerome Powell said Friday in Zurich, bolstering expectations for a rate cut at the Fed’s meeting on Sept. 18.
Sterling was down 0.4% at $1.2235 as traders waited to see whether the British parliament would vote to hold an early general election before the Oct. 31 Brexit deadline. If a snap election were held and the Conservative Party won, it could scrap recent legislation to extend Britain’s exit from the European Union for a third time.
· U.K. Prime Minister Boris Johnson has lost a second bid to hold a snap election, making it more likely that he will have to ask the EU for an extension to the current Brexit deadline.
The government needed 434 votes — or two-thirds of the votes from all lawmakers in the 650-seat lower house of parliament. But in the early morning Tuesday vote, only 293 supported the government’s proposal.
Johnson said the government will press on with negotiating a Brexit deal and will not delay Britain’s exit from the European bloc. He also said he will be going to the European Union Summit on Oct. 17 in a bid to get an agreement.
During the debate Monday, Labour Party leader Jeremy Corbyn said his party will not vote for an election until the possibility of a no-deal Brexit at the end of October has been taken off the table.
U.K. Prime Minister Boris Johnson’s office has confirmed the British Parliament will be suspended for the next five weeks starting Monday, after Johnson visited his counterpart in Dublin to discuss solutions to a problem that bedevilled his predecessor Theresa May: how to reconcile an open border between Ireland and the UK, while allowing Britain to strike independent trade deals in the future.
· North Korea fired two unidentified projectiles on Tuesday morning from South Pyongan province towards the east, South Korea’s Joint Chiefs of Staff said.
The launches came immediately after North Korea said on Monday it was willing to restart nuclear talks with the United States in late September.
Tuesday’s launch is the eighth by North Korea since U.S. President Donald Trump and North Korean leader Kim Jong Un met at the heavily militarized border between the two Koreas in June.
· Oil prices rose more than 2% on Monday after the new Saudi energy minister, Prince Abdulaziz bin Salman, confirmed expectations that he would stick with his country’s policy of limiting crude output to support prices.
Crude prices were also supported by comments made by Israeli Prime Minister Benjamin Netanyahu. He said Monday that Iran has a secret nuclear facility and called for action against the Middle Eastern nation.
Brent crude futures gained $1.31, or 2.3%, to $62.58 a barrel, while U.S. West Texas Intermediate (WTI) crude futures rose $1.33, or 2.4%, to $57.85 a barrel.
Reference: Reuters, CNBC
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