· The euro fell to its lowest in two-and-a-half years against the U.S. dollar on Monday as concerns about euro zone growth weighed on the single currency, while the greenback benefited from seasonal demand and uncertainty arising from the U.S.-China trade war. German annual inflation unexpectedly slowed for the third consecutive month in September, data showed on Monday.
The German CPI print this morning was a little bit on the disappointing side, said Bipan Rai, North American head of FX strategy at CIBC Capital Markets in Toronto.
According to the advanced estimates published by Germany's Destatis, inflation, as measured by the Consumer Price Index, is expected to be 1.2% on a yearly basis in September following August's reading of1.4%. This figure also came in below the market expectation of 1.3%.
Germany’s leading economic institutes have also revised down their growth forecast for Europe’s biggest economy for this year, two sources with knowledge of their decision told Reuters on Monday.
The revisions, which feed into the government’s own output projections, reflect growing concerns that a slowdown in Germany driven by a recession in the export-dependent manufacturing sector could hamper the broader euro zone economy. Demand for dollars heading into the last quarter of the year is also boosting the greenback.
In Q4 we tend to see strong seasonal demand for the U.S. dollar, and given the fact that euro/dollar is the most frequently traded pair in the foreign exchange market, that certainly means that we could be seeing some further downside in the euro going forward, Rai said.
The euro was last down 0.37% at $1.0898, after earlier falling to $1.0883, the lowest since May 2017. Investors are also focused on the U.S.-China trade war, which is being blamed for slowing global growth.
The U.S. dollar index, which tracks the greenback against a basket of its peers, was last at 99.397 after rising from levels below 99.2 yesterday.
· President Donald Trump’s administration is considering delisting Chinese companies from U.S. stock exchanges, three sources briefed on the matter said on Friday, in what would be a radical escalation of U.S.-China trade tensions. China warned on Monday of instability in international markets from any “decoupling” of China and the United States.
Washington and China are preparing for another round of trade talks scheduled for Oct. 10 and 11. Uncertainty around the outcome of an impeachment inquiry into Trump may also provide safe-haven demand for the greenback.
· Trump on Monday escalated his attacks against the lawmaker leading the impeachment inquiry against him, suggesting that Representative Adam Schiff be arrested for “treason.”
· Chinese officials said they are accelerating efforts to open financial markets and encourage foreign flows after reports the White House deliberated limiting U.S. investments in China.
“It is necessary to further expand the high-level two-way opening of the financial industry, encourage overseas financial institutions and funds to enter the domestic financial market, and enhance the vitality and competitiveness of China’s financial system,” the Financial Stability and Development Committee of the State Council said in a statement Sunday.
· President Donald Trump’s former national security advisor said the United States is in a “classic standoff” with North Korea as Washington seeks to denuclearize the Korean Peninsula.
In his first public remarks since leaving the Trump administration three weeks ago, John Bolton said Monday that it would be unacceptable for North Korean leader Kim Jong Un to possess nuclear warheads.
“I think right now we are in a classic standoff with North Korea. They want a piece of something that we should not be prepared to give them,” Bolton said of Pyongyang’s ambition to maintain an arsenal of nuclear weapons.
· Oil fell on Monday as China’s economic outlook remained weak amid an ongoing trade war with the United States and market fears of supply shortfalls and conflicts in the Middle East after the Sept. 14 attack on Saudi Arabia faded.
Brent crude futures were down $1.16, or 1.9%, at $60.75 a barrel. U.S. West Texas Intermediate (WTI) crude futures fell $1.84, or 3.3%, to settle at $54.07.
Both benchmarks were on track for little price changes in September after volatile month where prices spike nearly 20% after the attacks halved Saudi Arabia’s output, but have pared nearly all those gains as output has been quickly restored.
For the quarter, however, global benchmark Brent was set for a 8.6% loss, while WTI was down about 6.1%, as concerns that the trade war between the United States and China has plunged global economic growth to its lowest levels in a decade weighed on oil demand growth.
China’s official Purchasing Managers’ Index (PMI) was slightly improved this month, increasing from 49.5 in August to 49.8 in September, but remained below the 50-point mark that separates expansion from contraction on a monthly basis, data from the National Bureau of Statistics showed.
Reference: CNBC, Reuters, FXStreet
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