· British pound slips in Brexit countdown, the Australian dollar rallies
Sterling was set to snap five weeks of gains with a slump on Friday, as leaders on both sides of Brexit trade talks sounded doubtful about finding a resolution, while the Australian dollar soared along with iron ore prices to hit a 2.5-year high.
The greenback was pinned near a two-and-a-half year low, with markets heavily short dollars as investors bet on better returns in other currencies as the pandemic recovery takes hold.
The euro rose to $1.2158 even after the European Central Bank expanded its bond buying scheme, given the move was widely expected. The central bank also lifted growth forecasts but lowered inflation projections for 2022.
Against a basket of currencies the dollar drifted lower to 90.662, which is barely a third of one percent above last week’s 31-month trough.
The yen rose 0.3% to 103.04 per dollar and the New Zealand dollar rose 0.1% to $0.7104.
The Australian dollar has broken past 75 U.S. cents for the first time since mid-2018 overnight as prices surged for Australia’s biggest export commodity, iron ore.
It last traded at $0.7547 and is set for a sixth consecutive weekly rise. Over that time, it has gained five cents, or 7% against the dollar.
The Australian dollar also hit a one-and-a-half year high of 78.58 yen and a six-month peak of A$1.6083 per euro overnight and even leapt against the yuan despite worsening trade tensions between China and Australia.
Final Countdown
Investors have until the weekend to make last-minute adjustments to their sterling positions as Brexit trade talks enter their final lap.
The pound slipped 0.8% overnight after British Prime Minister Boris Johnson said on Thursday there was “a strong possibility” Britain and the European Union would fail to strike a deal and it changed hands at $1.3306 in Asian morning trade.
The British pound has shed 1% so far this week as efforts to seal a trade deal with the EU before protections on some $1 trillion in annual trade expire at the end of the month have yielded little thus far.
Johnson and European Commission President Ursula von der Leyen, who has said talks are “difficult,” have set Sunday as the deadline for finding a way forward.
Sterling volatility gauges are soaring as markets expect a wild ride to the finish line.
One-week volatility is at a new eight-month high and the premium of puts to calls is near its highest since April as investors pay up for downside protection.
· Treasury yields fall as investors monitor stimulus talks
U.S. Treasury yields slumped on Thursday morning, as Congress continued to negotiate over a coronavirus stimulus package, with the House of Representatives passing a one-week extension to relief funding.
The yield on the benchmark 10-year Treasury note fell to 0.92%, while the yield on the 30-year Treasury bond dipped to 1.67%. Yields move inversely to prices.
· U.S. FDA advisers overwhelmingly back authorizing Pfizer COVID-19 vaccine
A panel of outside advisers to the U.S. Food and Drug Administration on Thursday voted overwhelmingly to endorse emergency use of Pfizer’s coronavirus vaccine, paving the way for the agency to authorize the shot for a nation that has lost more than 285,000 lives to COVID-19.
The FDA is widely expected to authorize emergency use in days. Distribution and inoculations in the United States are expected to begin almost immediately thereafter.
The committee voted 17-4 that the known benefits of the vaccine outweighed the risks of taking the shot for individuals 16 and older, with 1 member of the panel abstaining.
Pfizer had asked that the two-dose vaccine be approved for use in people aged 16 to 85. Several advisory panel members discussed whether 16 and 17 year olds should be included in the recommendation. In the end, they voted on the question as put them by the FDA, which included 16 to 17 year olds.
· Battleground states urge Supreme Court to reject Texas’ bid to overturn Biden’s wins
The battleground states whose presidential election results are being challenged by Texas at the Supreme Court urged the justices on Thursday not to take up the case.
The four states targeted in the lawsuit warned in uncharacteristically sharp briefs that granting Texas’ unprecedented request would “do violence to the Constitution” and “disenfranchise millions” of voters.
Those states — Pennsylvania, Michigan, Wisconsin and Georgia — have all certified their election results, with Democrat Joe Biden defeating President Donald Trump.
· BOJ likely to extend corporate funding aid schemes next week: sources
The Bank of Japan is likely to decide next week to extend a range of steps aimed at easing corporate funding strains as a resurgence of coronavirus infections cloud the economic outlook, say sources familiar with its thinking.
The measures, due to expire in March, will likely be extended for at least half a year, four sources said on condition of anonymity as they were not authorised to speak publicly.
“With so much uncertainty over the outlook, it’s desirable for the BOJ to reach a decision on the extension as early as possible,” said one of the source, a view echoed by three other sources.
There is a slim chance a decision may be postponed until the BOJ’s rate review in January, if some in the board prefer to wait for more data on corporate funding strains, they said.
· Oil price rally builds steam as coronavirus vaccine rollouts begin
Oil rose around 1% on Friday, extending a sharp rally overnight that saw Brent rise above $50 for the first time since March, as coronavirus vaccination rollouts kept hopes alive that demand for crude would build up next year.
Brent was up 45 cents or 0.9% at $50.70 a barrel by 0121 GMT, after gaining nearly 3% on Thursday. U.S. oil was up 50 cents, or 1%, at $47.28 a barrel, having also risen almost 3% in the previous session.
That leaves prices set for a sixth consecutive week of gains as promising vaccine trials helped quell gloom over record increases in the number of new infections and deaths around the world in the coronavirus pandemic.
Reference: CNBC, Reuters
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