· The dollar hovered below 2-1/2-month highs against the yen on Tuesday, failing to extend recent gains as optimism over trade negotiations between the world’s two largest economies and for an orderly British exit from the European Union started to fade.
In Asian trade, the dollar eased marginally to 108.31 JPY= against the yen, still not far from its 2-1/2-month high of 108.63 yen marked on Friday.
The euro was flat at $1.1031 EUR= versus the greenback, off Friday's three-week high of $1.1062.
China's yuan CNY=CFXS remained relatively firm versus the dollar in onshore trade, a day after it hit a two-month high of 7.0494. It last traded at 7.0738 per dollar, a touch lower on the day.
· The dollar was down 1% against the lira for the session, with the Turkish currency trading at 5.8628 per dollar at 8 a.m. London time on Tuesday.
Trump has been threatening to “totally obliterate” Turkey’s fragile economy over President Recep Tayyip Erdogan’s military offensive into northern Syria against U.S.-backed Kurdish forces.
“These appear to be relatively light sanctions — meant to appease Congress without sundering Trump’s relations with Erdogan,” Charlie Roberston, global chief economist at Renaissance Capital, told CNBC.
· Sterling jumps after EU negotiator Barnier says Brexit deal is still possible this week
· US Dollar Price Volatility Report: IMF GDP Outlook & Fed Cut Odds
According to the latest overnight swaps pricing, rate traders are expecting a 70.8% probability that the Federal Reserve cuts interest rates later this month. This compares to the 82.2% probability priced in by markets early last week. With the US-China trade war taking a turn for the better following last Friday’s phase 1 trade agreement supposedly reached, the Fed could have more wiggle room to be patient with future monetary policy decisions rather than cut rates aggressively to insure against downside risks. In turn, the US Dollar could be provided with a strong tailwind if Fed rate cut expectations recede further in response to this development.
· Bank of Japan Governor Haruhiko Kuroda said on Tuesday the central bank would not hesitate to take additional easing steps if risks to the economy grow and threaten momentum towards its 2% inflation target.
“We need to pay closer attention to the possibility that momentum towards achieving our price target will be lost,” Kuroda said in a speech at a quarterly meeting of the central bank’s regional branch managers.
· Germany does not need an economic stimulus package but needs to cut red tape and taxes, the country’s Economy Minister Peter Altmaier told public broadcaster ZDF on Tuesday.
· The European Union aims to resume negotiations with Thailand on a free trade agreement (FTA), the Council of the European Union said in a statement, after suspending trade talks following a 2014 military coup.
· Spain is braced for more protests in Catalonia as anger mounts over jail terms meted out to pro-independence leaders in the region.
There were violent clashes in Barcelona Monday following the prison sentences, which totaled almost 100 years to prominent separatist leaders in Catalonia’s independence movement.
Spain’s Supreme Court jailed nine Catalan separatist leaders for between nine and 13 years for their involvement in a failed independence bid on October 1, 2017. They were charged with sedition, and some of the leaders were convicted for the misuse of public funds too. Three other prominent figures in the movement were charged with disobedience but were not jailed.
· Oil prices fell on Tuesday, after heavy losses in the previous session, as two days of weak Chinese data added to worries about the top crude oil importer’s energy demand growth.
Brent crude LCOc1 fell 42 cents, or 0.71%, to $58.93 a barrel by 0720 GMT, while U.S. West Texas Intermediate (WTI) crude CLc1 dropped 44 cents, or 0.82%, to $53.15.
· Royal Dutch Shell (RDSa.L) still sees abundant opportunity to make money from oil and gas in coming decades even as investors and governments increase pressure on energy companies over climate change, its chief executive said.
· The Organization of the Petroleum Exporting Countries and its allies are committed to sustaining oil market stability beyond 2020 with global physical supplies currently relatively tight, OPEC Secretary-General Mohammad Barkindo said on Tuesday.
· WTI struggles to justify trade/political plays
Despite US-Turkey tension and the increase in the US manufacturing gauge, WTI remains under pressure around $53.55 during early Tuesday.
Even so, the black gold stays on the back foot as uncertainty surrounding the US-China trade deal weighs on prices. While the US side seems too optimistic about trade deal with the dragon nation after first positive step, Chinese diplomats want further talks before signing a final deal.
Technical Analysis
While $55.05/10 and 100-day Simple Moving Average (SMA) level of $55.40 act as nearby resistances, multiple supports around $51.30 and $50.50 could limit near-term declines of the oil benchmark.
Reference: Reuters, CNBC, FX Street, Daily FX
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