· The euro was little changed versus the dollar on Tuesday as investors were wary of a looming deadline for U.S. tariffs on China, the British election and upcoming Federal Reserve and European Central Bank meetings.
The greenback was neutral against a basket of six other major currencies.
Front of mind is whether Washington will go ahead with a new round of tariffs on Sunday, or whether a deal with China can be reached before then.
White House economic adviser Larry Kudlow said on Friday that the Dec. 15 deadline is still in place, but Agriculture Secretary Sonny Perdue on Monday raised the possibility the tariffs are not imposed.
Against the euro, the dollar was last flat at $1.1072, and against the Japanese yen the greenback found support after last week’s declines, steadying at 108.62 yen. The dollar was also steady against a basket of currencies at 97.605.
The Chinese yuan — the most sensitive currency to the U.S. and China trade war — was also trading neutral against the U.S. dollar in the offshore market, last at 7.0370.
Soaring inflation in China, ahead even of lofty expectations, had little effect on a market waiting for trade news.
Investors are almost certain the Fed will hold rates steady when its two-day meeting concludes on Wednesday, increasing investors’ focus on the outlook and on finding a trade-war truce.
The ECB is likewise expected to keep interest rates steady.
Elsewhere, the pound maintained its recent gains, last at $1.3140 and 84.26 pence against the euro, with market participants still viewing a Conservative Party majority win as the most likely outcome of the general election on Thursday.
· Boris Johnson is on track to win a modest majority, YouGov poll finds
British Prime Minister Boris Johnson is on course to win a majority of 28 in parliament at Thursday’s election, according to a closely watched model from pollsters YouGov, down sharply from a forecast of 68 last month.
Johnson’s Conservative Party could win 339 seats out of 650, up from 317 in the 2017 general election but fewer than the 359 predicted the last time YouGov ran the model ran on Nov. 27, according to results published by The Times on Tuesday.
The opposition Labour Party looks on track to secure 231 seats, down from 262 in 2017, but a better showing than the 211 they had been on course for, The Times said.
YouGov said the uncertainty around the model was such that it was possible no party would win an overall majority.
· Trump administration reportedly plans to delay China tariffs set to take effect Sunday
The U.S. and China are taking steps to delay the next round of American tariffs set for Sunday as they seek a deal to rein in a raging trade war, The Wall Street Journal reported Tuesday.
Negotiators from the world’s two largest economies “are laying the groundwork” for the Trump administration to hold off on 15% tariffs on about $160 billion in Chinese goods, according to the newspaper. The U.S. and China have tried to salvage a potential “phase one” trade agreement, a deal that would involve Chinese purchases of U.S. agriculture first announced in October. The sides have failed to sign a partial deal.
· The president of Goldman Sachs said Tuesday that the U.S. economy looks like it’s picking up speed after a lackluster start to the year thanks to easier monetary policy and the resilience of the American consumer.
“We’re pretty constructive on the overall economy. Certainly, in the United States in particular, the economy feels if anything like it might be accelerating again from what had been a little bit more of a patchy 2019,” said Goldman Chief Operating Officer John Waldron.
“I do think the Fed’s easing bias has made a big impact,” he added. “So we’re seeing that implication of easier policy coming through in the economy and it’s become much more of a stimulant for particularly consumers, but corporations as well.”
· The Fed is expected to hold rates steady and vow to keep short-term lending markets stable
The Federal Reserve is expected to conclude its December meeting on Wednesday afternoon by signaling it’s in no hurry to do anything to change its neutral stand on interest rates.
But Fed Chairman Jerome Powell is likely to promise the central bank will do whatever is necessary to keep liquidity high and overnight lending rates steady at the end of the year, a time when the short-term lending market is typically under the most pressure
The Fed releases its post-meeting statement at 2 p.m. ET Wednesday, and it is not expected to make significant changes in its statement from its previous meeting. It will, however, release its interest rate forecast and latest economic projections at the same time, and it could show some improvement particularly after November’s increase in payrolls of 266,000.
Powell then speaks at 2:30 p.m., and he could be asked about the short-term lending market.
· Mike Bloomberg would beat President Donald Trump if the former New York City mayor manages to secure the Democratic nomination for the 2020 presidential election, former White House communications director Anthony Scaramucci said on Tuesday.
“If Mayor Bloomberg, if Mike were to get the nomination, he would beat the president,” Scaramucci said at the SALT leadership conference in Abu Dhabi.
Scaramucci told CNBC’s Dan Murphy that a centrist like Bloomberg appeals to moderate voters.
“Those 15% to 18% of the people, I think they are exhausted. I think they have a level of Trump fatigue,” said Scaramucci, who is founder of SkyBridge Capital, the host of the conference.
About Bloomberg, Scaramucci said: “He’s a very sound guy and a very good business manager, and he’s been a very capable politician, so for those reasons, I think he’ll give him a big run. I think he’ll beat him.”
· Trump is fourth U.S. president to face impeachment as Democrats unveil charges
Democrats in the U.S. House of Representatives announced impeachment charges against President Donald Trump on Tuesday, making him the fourth president in U.S. history to face a formal effort to remove him from office.
The effort to force Trump out of the White House faces long odds of success. At least 20 Senate Republicans would have to vote to remove him from office, and none so far have indicated they are considering such a move.
The Senate may opt to forego a full trial and instead hold its vote after House Democrats and Trump’s defenders make their opening statements, Republican Senate Leader Mitch McConnell said at a news conference. That may go against the wishes of Trump, who wants to call his own witnesses.
· Oil prices inched up on Tuesday as OPEC’s deal with associated producers last week to deepen output cuts in 2020 continued to provide a floor for prices, but U.S.-China trade tensions clouded the demand outlook.
Brent crude was up 7 cents to $64.32 a barrel, and West Texas Intermediate oil settled up 22 cents at $59.24 a barrel.
The benchmarks fell 0.2% and 0.3% respectively on Monday.
Last week, the Organization of the Petroleum Exporting Countries and associated producers like Russia agreed to deepen output cuts from 1.2 million barrels per day (bpd) to 1.7 million bpd to support prices.
However, a Dec. 15 deadline for the next round of U.S. tariffs on Chinese imports weighed on markets.
Reference: CNBC, Reuters, Investing
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