· The U.S. dollar rose modestly on Tuesday, lifted by a dramatic slide in the pound after British Prime Minister Boris Johnson put a no-deal exit from the European Union back on the table.
Britain on Tuesday set a hard deadline of December 2020 to reach a new trade deal with the EU, trying to pressure Brussels to move more quickly to seal an accord. Johnson will use his control of parliament to outlaw any extension of the Brexit transition period beyond 2020. It was his boldest move since winning a large majority in Thursday’s election, and it spooked financial markets.
The pound was 1.53% lower in North American trade at $1.312 and was down 2.89% from Friday when it hit its highest since May 2018 following Johnson’s victory.
The dollar index was slightly higher, up 0.20% at 97.214, driven by the fall in the pound as well as a fall in the Australian dollar.
The Aussie dropped on Tuesday after Australia’s central bank opened the door to another cut in interest rates as early as February. The trade-linked currency also weakened as euphoria from the U.S.-China trade agreement faded. It was last down 0.52% at 0.685 U.S. dollar to the Aussie.
· 'Reckless' Boris Johnson announces new law which increases chances of no-deal Brexit in 2020
BORIS Johnson will make it illegal to extend the Brexit transition period beyond the end of next year as he fired the opening salvo to the crucial trade talks with the EU.
The move is designed to call the EU’s bluff ahead of the start of negotiations over Britain’s future trading relationship with Brussels.
The move was branded "reckless and irresponsible" by Labour's shadow Brexit secretary Keir Starmer, while Liberal Democrat co-leader Ed Davey said it would "send the country straight off the no-deal cliff."
That is despite a warning from Michel Barnier, the EU's chief Brexit negotiator, that striking a "comprehensive" free-trade deal between the EU and UK in 11 months next year will be impossible.
"With regards to this agreement, we will not get everything done in 11 months. We will do all we can – we won't do it all," he told colleagues earlier this month.
· The Phase 1 agreement does not mean tensions are going to fully dissipate anytime soon, Dallas Fed President Robert Kaplan said on Tuesday.
“Phase 1 is better than not having a Phase 1 but it doesn’t mean there won’t still be trade uncertainty,” Kaplan said in an interview with Bloomberg TV. “I think the trade issues with China are going to go on for...years.”
· U.S. manufacturing output rebounded more than expected in November, as the end of an almost six-week strike at General Motors plants boosted auto production.
The Federal Reserve said on Tuesday that manufacturing production rose 1.1% last month after a downwardly revised 0.7% fall in October. Industrial output also rose 1.1% in November after a downwardly revised drop of 0.9% in October.
Excluding motor vehicles and parts, overall industrial production and manufacturing output in November rose 0.5% and 0.3% respectively.
Economists polled by Reuters had forecast overall manufacturing output would rise 0.7% and industrial output would increase 0.8% in November. Production at factories still fell 0.8% in November on a year-on-year basis.
· The U.S. House of Representatives on Tuesday approved a $1.4 trillion spending package to avert a partial government shutdown that also would raise the U.S. tobacco purchasing age to 21 and permanently repeal several of the Affordable Care Act’s (ACA) taxes.
The spending package now heads to the Senate, where lawmakers aim to approve it before current government funding runs out on Saturday, avoiding the type of messy budget battle that resulted in a record 35-day interruption of government services late last year and early this year.
· President Donald Trump on Tuesday sent House Speaker Nancy Pelosi a raging, six-page letter in which he tore into the impeachment process currently underway, calling it an “illegal, partisan attempted coup.”
The letter came as the House gears up to vote this week on whether to make Trump only the third president in American history to be formally impeached.
“By proceeding with your invalid impeachment, you are violating your oaths of office, you are breaking your allegiance to the Constitution, and you are declaring open war on American Democracy,” the president said in his letter.
· After skipping a gathering of the world’s most elite in Davos, Switzerland, last January, President Donald Trump will attend the World Economic Forum in 2020, Bloomberg reported Tuesday.
Trump blamed his no-show last time on the partial government shutdown that was triggered by a funding dispute over a proposed wall along the United States’ southern border.
A spokesperson for the White House did not immediately respond to a request for comment about the president’s plans to attend in 2020.
The 50th annual forum, held Jan. 21-24 will focus on “Stakeholders for a Cohesive and Sustainable World.” The 3,000 attendees, titans of industry and political leaders, will discuss furthering goals toward improving society, the economy and the environment, according to a recent release.
· Oil prices rose more than 1% on Tuesday, supported by hopes the U.S.-China trade deal will bolster oil demand in 2020 after a prolonged dispute between the world’s two largest economies dented global market sentiment.
The Phase 1 agreement between the United States and China has been “absolutely completed,” Larry Kudlow, a top White House adviser, said on Monday, predicting U.S. exports to China will double under the deal.
Brent crude LCOc1 futures gained 76 cents, or 1.2%, to settle at $66.10 a barrel. U.S. West Texas Intermediate (WTI) crude CLc1 futures rose 73 cents, or 1.2%, to settle at $60.94 a barrel.
The prolonged trade dispute has dampened oil demand and weighed on prices. Banks including JP Morgan and Goldman Sachs have revised up their 2020 price forecasts in the wake of the improving trade outlook and a new OPEC-led agreement to curb output.
Reference: CNBC, Reuters, The Sun, Business Insider
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