· The U.S. dollar fell sharply against the euro and sterling on Thursday as European Union leaders unanimously backed a long-awaited Brexit deal to take Britain out of Europe on Oct. 31.
While uncertainty remains on whether the pact will be ratified by British lawmakers, news of the agreement was enough to boost the euro 0.46% against the dollar and 0.12% against the British pound.
On Thursday, the German government said it lowered its 2020 forecast for economic growth to 1.0% from 1.5% previously, but added that Europe’s largest economy was not facing a crisis.
Sterling was 0.34% higher at $1.2874 in a very choppy session.
The dollar has come under pressure this week, shedding about 0.7% against a basket of currencies. .DXY
The U.S. dollar index, which tracks the greenback against a basket of its peers, was last at 97.594, sliding from an earlier high of 98.113.
The greenback, which fell on Wednesday after weak U.S. retail sales data supported the case for further interest rate cuts by the Federal Reserve, extended its weakness on Thursday.
Data showed U.S. homebuilding tumbled from a more than a 12-year high in September. Separately, data showed a deceleration in factory activity in the mid-Atlantic region in October.
· New York Federal Reserve President John Williams said Thursday the central bank is learning as it works to increase liquidity in the banking system and that it will adjust its approach as needed.
· The European Central Bank must be careful in lowering interest rates further given the rising risk of unintended side-effects, Italian central bank chief Ignazio Visco said on Thursday.
The ECB cut its key rate to a record low of minus 0.5% last month, and markets priced further cuts for the coming year in the face of exceptionally weak inflation pressures.
But Visco, considered a dove on the ECB’s rate-setting Governing Council, noted that negative rates hurt banks, which ultimately transmit monetary policy to the real economy, so lower rates could prove counterproductive.
· Britain will be on course for more distant economic ties with the European Union, making the country poorer, if Prime Minister Boris Johnson wins parliamentary backing for the Brexit deal he clinched with Brussels on Thursday.
Compared with the deal his predecessor Theresa May reached last year - which parliament rejected three times - Johnson’s deal aims for less regulatory alignment with the EU, and greater trade barriers between Britain and its largest trading partner.
Johnson now faces a fight to convince parliament, where his Conservative Party lacks a majority, to approve the deal in a vote due to take place on Saturday.
“Even if Boris Johnson does manage to close the deal, investor celebration of this might soon be dampened by the recognition that this is a fairly hard Brexit,” said Paul O’Connor, a fund manager at Janus Henderson.
· Britain’s finance ministry and almost all external economists have forecast that increased trade barriers will cause the British economy to grow more slowly than if it were to stay in the EU, and the damage increases as trade barriers rise.
· European Union leaders unanimously backed a new Brexit deal with Britain on Thursday, leaving Prime Minister Boris Johnson facing a battle to secure the UK parliament’s backing for the agreement if he is to take Britain out of Europe on Oct. 31.
“All in all, I am happy, relieved that we reached a deal,” he said. “But I am sad because Brexit is happening.”
Those sentiments were echoed by the EU’s chief negotiator, Michel Barnier, and by Donald Tusk, president of the European Council, who has been a vocal opponent of Brexit.
· Britain’s new Brexit deal has a “decent chance” of clearing parliament on Saturday and the alternative is to leave the European Union in two weeks’ time without anything to soften the economic shock, finance minister Sajid Javid said.
Instead, he said, parliament had to realize that the plan would end the uncertainty that has dogged the world’s fifth-biggest economy since voters decided to leave the EU in 2016.
· China emphasized Thursday that the U.S. must remove tariffs in order for the two countries to reach a final agreement on trade, Ministry of Commerce spokesman Gao Feng said.
“China’s position, principle and goal for the China-U.S. trade negotiations has never changed,” Gao said in Mandarin at a weekly press conference, according to a CNBC translation.
“Both sides’ ultimate goal for the negotiations is to end the trade war, cancel all additional tariffs,” he said. “This is good for China, good for the U.S. and good for the world.”
· China is expected to post its weakest economic growth in at least 27-1/2 years on Friday, raising pressure on Beijing to roll out more stimulus to counter the effects of a costly trade war with the United States.
Downbeat data in recent months has highlighted weaker demand at home and abroad, fanning expectations that Beijing will need new measures to ward off a sharper slowdown that could drive job losses.
Analysts polled by Reuters expect gross domestic product (GDP) to grow 6.1% in the July-September quarter from a year earlier, the slowest pace since the first quarter of 1992, the earliest quarterly data on record.
That would mark a further loss of momentum from the previous quarter’s 6.2% pace, with analysts expecting the 2019 full-year expansion to slow a near 30-year low of 6.2%.
· Oil rose 1% on Thursday, boosted by a weaker dollar and the announcement that the United Kingdom and the European Union had reached a deal on Brexit. Industry data did show a larger-than-expected build-up in U.S. inventories.
Global benchmark Brent crude oil settled 52 cents higher at $59.94. U.S. WTI crude oil was up 65 cents, or 1.2%, to settle at $53.99.
U.S. crude inventories soared by 9.3 million barrels to 434.9 million barrels in the week to Oct. 11, the U.E. Energy Information Administration said.
Analysts had estimated U.S. crude inventories rose by around 2.8 million barrels last week.
Reference: Reuters, CNBC
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