· The dollar held near a one-month high against major currencies on Monday after last week’s run of data confirmed that the United States economy is holding up well, while China’s yuan hit a new six-month high.
Mostly though it was another quiet start to the week for currencies, with FX volatility near all-time lows and little in the way of key economic data.
Investors are focused on central bank meetings in Japan, which is on Tuesday, and the European Central Bank meeting on Thursday.
Moves were slight and volumes thin as Lunar New Year approaches in Asia and with U.S markets closed for Martin Luther King day on Monday.
The dollar edged up marginally against a basket of currencies, with the index at 97.658. The euro was little changed at $1.1094.
“I think the U.S. dollar will continue to outperform against the major currencies,” said Jeffrey Halley, senior market analyst for Asia Pacific at broker OANDA, adding he counted the chance of a Federal Reserve interest rate cut soon at zero. “I think the bar for a rate cut is quite high at the moment.”
China’s offshore yuan rose to as high as 6.8458, a new six-month high.
Sterling dropped again on Monday to $1.2971, down 0.3% on the day, after Britain’s finance minister Sajid Javid’s comments at the weekend that Britain would not commit to sticking to European Union rules in post-Brexit trade talks.
· The Bank of Japan is set to keep monetary policy steady and signal its cautious optimism over the global outlook on Tuesday, reinforcing market expectations that the rising cost of prolonged easing will keep the hurdle for further stimulus high.
Easing Sino-U.S. trade tensions and receding pessimism over the global economy could shift the focus of debate within the BOJ towards the strains imposed on the country’s banking system by negative interest rates, some analysts say.
A majority of economists recently polled by Reuters said the BOJ’s negative rate policy has had little positive impact on the economy, and that its next move would be to taper its massive stimulus as early as next year.
· IMF says the outlook for the global economy ‘remains sluggish’ as it cuts growth forecasts
DAVOS, Switzerland — The International Monetary Fund (IMF) has become less optimistic about global growth, warning that the outlook remains sluggish and there are no clear signs of a turning point.
The Washington-based institution forecast in October a global growth rate of 3% for 2019 and of 3.4% for 2020. The IMF has now revised down those forecasts to 2.9% and 3.3%, respectively. The downward revision was mostly due to lower growth in India. For 2021, the Fund has forecast a growth rate of 3.4%.
“The projected recovery for global growth remains uncertain. It continues to rely on recoveries in stressed and underperforming emerging market economies, as growth in advanced economies stabilizes at close to current levels,” Gita Gopinath, the IMF’s chief economist, said in a written statement.
Nonetheless, the Fund noted that some of the biggest economic uncertainties, highlighted in October, have dissipated. “Some risks have partially receded with the announcement of a U.S.-China Phase I trade deal and lower likelihood of a no-deal Brexit,” Gopinath said.
· Oil prices rose to their highest in more than week on Monday after two large crude production bases in Libya began shutting down amid a military blockade, risking reducing crude flows from the OPEC member to a trickle.
Brent crude was up 37 cents, or 0.6%, at $65.22 by 0952 GMT, having earlier touched $66 a barrel, the highest since Jan. 9.
The West Texas Intermediate contract was 24 cents, or 0.4%, higher at $58.78 a barrel, after rising to $59.73, the highest since Jan. 10.
Two major oilfields in southwest Libya began shutting down on Sunday after forces loyal to Khalifa Haftar closed a pipeline, potentially cutting national output to a fraction of its normal level, the National Oil Corporation (NOC) said.
The closure, which follows a blockade of major eastern oil ports, risked taking almost all the country’s oil output offline
If Libyan exports are halted for any sustained period, storage tanks will fill within days and production will slow to 72,000 barrels per day (bpd), an NOC spokesman said. Libya has been producing around 1.2 million bpd recently.
“A prolonged disruption from Libya would be enough to swing the global oil market from surplus to deficit in 1Q20,” said ING analyst Warren Patterson, referring to the first quarter of 2020.
Reference: CNBC, Reuters
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