· The dollar fell to a four-week low against the yen and a one-week trough versus the euro on Thursday, as investors fretted that weakness in both the U.S. manufacturing and service sectors signals a slowdown in the world’s largest economy.Expectations that the United States would continue to outperform other major economies and put pressure on the Federal Reserve to slow its interest rate cutting cycle were dampened this week after weak manufacturing and service sector surveys.
In afternoon trading, the dollar was down 0.3% against the yen JPY=, at 106.88 yen, falling to its lowest level in four weeks at 106.49 right after the ISM non-manufacturing report.
The dollar index fell 0.2% to 98.86 .DXY, with the euro up 0.1% at $1.0969 EUR=. The euro rose to a one-week high of $1.0999 after the data.
Investors now await Friday’s employment report to confirm or quell recession worries.
Rate futures have factored in another 25 basis-point easing at the upcoming Federal Reserve policy meeting later this month following the manufacturing and services data weakness. Chances of a rate cut jumped to nearly 92.5% on Thursday from 77% on Wednesday.
Elsewhere, sterling rallied 0.6% against the dollar to $1.2365 GBP= after the head of a group of eurosceptic lawmakers in Prime Minister Boris Johnson's Conservative Party said on Thursday the government's latest Brexit proposals offered the possibility of a "tolerable deal."
· The Institute for Supply Management (ISM) said its non-manufacturing activity index fell to a reading of 52.6 in September, the lowest since August 2016.
That added to fears sparked on Tuesday when a report showed U.S. factory activity contracted to its lowest level in more than a decade, as well as data on Wednesday showing private payrolls growth in August was not as strong as previously estimated.
The dour economic data as bets on a third U.S. rate cut this year at Fed’s October policy meeting surged to 90% from 40%, according to CME Group’s Fed Watch tool.
Traders are again expecting at least two more rate reductions by the end of 2019, which they had abandoned after the central bank described each of its last two rate cuts as a “mid-cycle adjustment.”
· U.S. holiday sales in 2019 are expected to be higher than a year earlier, the National Retail Federation said on Thursday, even as the retail sector grapples with fears of slowing global growth due to an ongoing U.S.-China trade war.
Sales in 2019 are estimated to grow between 3.8% and 4.2% to a range of $727.9 billion to $730.7 billion, the retail trade group said. That compares with sales of $701.2 billion, or 2.1% growth, in 2018.
The forecast comes at the start of a tense fourth quarter as latest data points to the U.S. economy sliding into a recession.
· House Intelligence Committee Chairman Adam Schiff, D-Calif., said Thursday that President Donald Trump’s request for China to investigate former Vice President Joe Biden constitutes “a fundamental breach of the president’s oath of office.”
On Thursday morning, Trump told reporters at the White House that “China should start an investigation into the Bidens, because what happened in China is just about as bad as what happened with Ukraine.” It was not immediately clear what Trump believes “happened in China” related to the Bidens.
· For nearly three years, President Donald Trump has dismissed the investigations that have shadowed almost every day of his presidency as hoaxes and witch-hunts, and the people leading them as crooks and liars.
But, so far, none of his targets has produced a public display of wrath to equal what the president directed at his latest antagonist, U.S. Representative Adam Schiff. The Democratic lawmaker, chairman of the House Intelligence Committee, has become the public face of a rapidly escalating impeachment inquiry that is the latest and perhaps most serious threat to Trump’s presidency.
Trump, who has branded the impeachment probe a “hoax,” has attacked Schiff as a “lowlife” and a liar, thundered at him during a White House news conference and suggested that he be questioned or arrested for treason.
· The United States and India can reach a trade agreement quickly if New Delhi takes strong, decisive actions, U.S. Commerce Secretary Wilbur Ross said on Thursday.
· British business activity wilted in the third quarter, especially in manufacturing, according to a survey on Friday that boded poorly for the country’s economy in late 2019 as it faces the Brexit crisis and a global slowdown.
The British Chambers of Commerce’s (BCC) survey of 6,600 companies showed domestic manufacturing sales fell at the fastest pace since late 2011. Growth in the much larger services sector also slowed.
· European Commission President Jean-Claude Juncker on Thursday pointed to a number of problematic issues in Britain’s latest Brexit proposal, saying that more discussions were needed.
“Accepting such a proposal would not meet all the objectives of the backstop: preventing a hard border, preserving North-South cooperation and the all-island economy, and protecting the EU’s Single Market and Ireland’s place in it,” the Commission said in a statement.
· European cheese makers complained on Thursday of being held “hostage” in a transatlantic trade battle that had nothing to do with them after the United States slapped 25% tariffs on the sector in retaliation for state aid to aerospace group Airbus.
The dismayed reaction came a day after the World Trade Organization gave Washington the green light to slap punitive tariffs on a range of European products, including spirits and cheese, in punishment for illegal EU aircraft subsidies.
· U.S. crude futures were slightly lower on Thursday, drawing some support from the stock market after earlier touching nearly two-month lows on weak economic data.
U.S. crude CLc1 settled at $52.45 a barrel, down 19 cents. Global benchmark Brent crude LCOc1 settled up 2 cents at $57.71 a barrel.
During the session, both benchmarks tumbled to the lowest level seen since early August, plunging as weak U.S. economic figures were released.
Reference: Reuters, CNBC
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