· The U.S. dollar index, which tracks the greenback against a basket of its peers, was at 90.427 — off a recent slump below the 90 level.
· British pound falls as UK faces new Covid strain, deadlock on Brexit trade talks
The British pound took a beating on Monday as the U.K. faces concerns over a new coronavirus strain as well as uncertainty stemming from Brexit trade deal negotiations.
Over the weekend, the U.K. said it had identified a new strain of Covid-19 which spreads more quickly than previous variants. Following that announcement, other nations said they would be temporarily restricting travel from the U.K. in efforts to prevent the new strain from entering their borders. The British government has already ordered an even stricter Covid lockdown in London ahead of Christmas.
As of 06:34 GMT, the British pound fell more than 1% to $1.3349, as compared with levels around $1.36 seen last week. Meanwhile, the euro also declined to $1.2184 after breaching the $1.225 level last week.
The currencies have recently fluctuated around headlines related to Brexit trade deal talks. Britain and the European Union remain in a deadlock as a Dec. 31 deadline looms, with disputes over issues such as fisheries plaguing negotiations.
Analysts remain bullish
Still, analysts told CNBC on Monday that they remain bullish on the pound going into 2021 despite headwinds the currency faces.
“We should expect some volatility for the pound and what we’re seeing this morning is reflective of that,” Rodrigo Catril, senior currency strategist at National Australia Bank (NAB), told CNBC’s “Squawk Box Asia” on Monday morning.
A Brexit trade deal before the end of the year is “still more likely than not,” Catril said, adding that “it makes sense and politically it will be difficult … to argue that the deal has broken down … because of (fisheries)” due to the industry’s relatively small magnitude in the overall economic deal being discussed.
Macquarie Group’s Gareth Berry also told CNBC’s “Street Signs Asia” on Monday that he was “hoping for a positive resolution” on Brexit talks by the end of this week.
“That should lead to a deal that all sides can live with and that can ultimately be ratified the following week in time for that Dec. 31 deadline,” said Berry, who is managing director and foreign exchange and rates strategist at Macquarie. “Sterling should love that, and that’s one reason why we’re quite bullish ... on sterling for the next few months.”
As for the virus, NAB’s Catril said its near-term economic impact is “significant” though expectations of stimulus and vaccine rollouts over the coming months are encouraging markets to “see the positive side over the medium term.”
· Treasury yields fall despite stimulus progress as virus concerns persist
U.S. government debt prices were higher Monday morning as Congress prepares to vote on a $900 billion coronavirus aid package, but concerns emerge over a new Covid-19 strain in the U.K.
At around 2 a.m. ET, the yield on the benchmark 10-year Treasury note was lower at 0.9263% while the yield on the 30-year Treasury bond fell to 1.6776%. Yields move inversely to prices.
· New coronavirus relief bill includes $600 stimulus checks, $300 in enhanced unemployment benefits
Congress is set to pass one of the largest stimulus packages in the nation’s history, which will send much-needed aid to struggling families and small businesses across the country as the nation continues to grapple with the economic fallout of the coronavirus pandemic.
The nearly $1 trillion Covid-19 relief bill will include a second stimulus check of up to $600 for many Americans, an extra $300 in enhanced unemployment insurance for 11 weeks, the continuation of key jobless programs and funding for food and rental assistance, among other provisions, lawmakers announced Sunday night.
Unemployment insurance
The bill provides an extra $100 per week for workers who “have both wage and self-employment income but whose base UI benefit calculation doesn’t take their self-employment into account,” according to a summary of the UI provisions.
It will take weeks for people to see the enhanced payments in their checks. In the meantime, millions of out-of-work Americans will likely experience a lapse in unemployment benefits for at least a few weeks. And remember: UI benefits are taxable.
Small business loans
The bill also includes $248 billion for another round of Paycheck Protection Program loans for small businesses, $12 billion of which is earmarked for minority-owned businesses and $15 billion of which will go to live venues, independent movie theaters and cultural institutions.
It also expands PPP eligibility to include nonprofits and local newspapers, TV and radio broadcasters.
Stimulus checks
The bill includes $600 checks for individual tax payers earning under $75,000 per year and their child dependents, half of the $1,200 payments distributed via the CARES Act. There will not be a cap on the amount that a single household can receive.
Rental relief
The bill provides $25 billion in rental relief, which can be used for future rent and utility payments as well as for any back rent owed or utility bills that have not been paid since the beginning of the pandemic. It also extends the nationwide eviction moratorium through January 31, 2021.
“It’s not enough, but it’s urgently and desperately needed,” says Diane Yentel, president and CEO of the National Low Income Housing Coalition (NLIHC), noting that low-income renters currently owe an estimated $30 to $70 billion in back rent.
Food assistance
The bill also addresses America’s worsening hunger crisis, providing $13 billion in increased SNAP funding.
What’s not included in the bill
The newest version of the bill does not include aid for state and local governments, desired by Democrats, nor liability protections for businesses, which Republicans demanded in earlier rounds of negotiations. The bipartisan team drafted a separate bill for those two provisions.
The bill also does not include checks for adult dependents or hazard pay for essential workers.
· Senate Majority Leader Mitch McConnell and Minority Leader Chuck Schumer said Sunday that lawmakers had reached an agreement on a $900 billion relief package, which will be voted on Monday.
· With the Pfizer and BioNTech vaccine already being rolled out across the country, shots of the Moderna inoculation began to be distributed on Sunday. An advisory panel recommended that essential workers and people over 75 should be first in line to receive the shot.
· ‘Out of control’ Covid strain makes UK a global pariah as countries impose travel bans
In Europe, France, Germany, Italy, Ireland and the Netherlands have all barred flights from the U.K.
Other countries, including Canada and Israel, have also imposed new measures barring flights from the U.K.
· Asia monitoring new UK strain, no flights cancelled yet
Battling their own surges in coronavirus cases, Asian nations including Japan and South Korea said they were closely monitoring a new super virulent strain of the virus identified in Britain, but none immediately cancelled UK flights.
The new strain could be up to 70% more infectious, the United Kingdom has said, prompting its European neighbours and several other countries including Canada and Iran to close their doors to travellers from the country.
· The foundation of China’s economic recovery is ‘not yet solid,’ leaders say at planning meeting
Covid-19 first emerged in the Chinese city of Wuhan late last year. In an effort to control the outbreak, Chinese authorities briefly shut down more than half the country early this year. GDP contracted by 6.8% in the first quarter, before returning to growth in the second quarter at 3.2%.
“Not yet having a solid (foundation) points to the slightly slower-than-expected launch of domestic demand and consumption,” Bruce Pang, head of macro and strategy research at China Renaissance, said in a Chinese statement, according to a CNBC translation.
Investment in manufacturing and the share not tied to the state hasn’t rebounded strongly, Pang said. He added there are doubts about the sustainability of exports, uncertainties about employment and many other concerns.
Economists have pointed out that much of China’s recovery has come from traditional drivers of growth such as exports, which have been boosted by overseas demand for pandemic-related products.
But many Chinese have yet to step up their spending amid concerns about future income. That lack of consumption is concerning for an economy that Beijing is trying to support more with domestic, rather than foreign, demand.
While China is on pace for roughly 2% growth this year, retail sales through the end of November are down 4.8% from a year ago.
“Next year, the speed of economic growth may slow after an initially rapid pace,” state media said, according to a CNBC translation of the Chinese text. “Keeping the economy operating in a reasonable range remains a key test.”
GDP expansion in the first few months of next year would look high compared with the contraction in the first quarter in 2020. Overall, many economists predict China’s GDP will grow about 8% next year.
Pang pointed out that rate would be equivalent to 5% growth in 2020 and another 5% increase in 2021.
That’s slower than the 6.1% pace in 2019.
· China leaves lending benchmark LPR unchanged but rate hike expectations grow
China kept its benchmark lending rate for corporate and household loans unchanged at its December fixing on Monday, as expected, although improving economic fundamentals have raised speculation about a rate hike next year.
The one-year loan prime rate (LPR) was kept at 3.85%, while the five-year LPR remained at 4.65%. The rates have been unchanged for eight straight months.
· Japan household assets hit record in Sept. as virus slows consumption
Assets held by Japanese households hit a record 1,901 trillion yen ($18 trillion) at the end of September, up 2.7 percent from a year earlier, as the coronavirus pandemic weakened consumption and left people with more cash and deposits, the Bank of Japan said Monday.
The expansion followed the government's cash handout program in which it gave 100,000 yen to each person to cope with the economic fallout from the pandemic. The result suggests that consumers did not splash out, instead adding to savings despite the intent of the policy.
The total of assets held in cash and deposits increased at the fastest pace of 4.9 percent to 1,034 trillion yen, also the largest on record and which accounts for 54.4 percent of overall assets held by Japanese households.
· Philippines to Start Vaccine Talks With Moderna by Year-End: CNN
The Philippines will start talks with Moderna Inc. on or before Dec. 30 to secure supply of the company’s coronavirus vaccine, Foreign Affairs Secretary Teodoro Locsin said Monday.
“Moderna is interested in giving an allocation,” he said in a live-streamed interview with CNN Philippines, citing Philippine ambassador to the U.S. Jose Manuel Romualdez.
The Philippines is also assured of 30 million doses of Novavax Inc.’s Covid-19 vaccine candidate, which will be produced by Serum Institute of India, Locsin said. It would be available in July, “possibly with no cash advance,” he said, and the “term sheet might be signed before the year ends.”
· Indonesia's capital has extended its virus restrictions by another two weeks from Monday (Dec 21) to prevent any further spikes in coronavirus cases during the holiday season as infections continue to rise.
· Oil prices skid as new coronavirus strain fuels demand concerns
Oil prices dropped about 3% on Monday as a fast-spreading new coronavirus strain that has shut down much of the United Kingdom fuelled worries over a slower recovery in fuel demand amid tighter restrictions in Europe.
Brent crude slid $1.54, or 3.0%, to $50.72 a barrel by 0510 GMT after rising 1.5% and touching its highest since March last Friday.
U.S. West Texas Intermediate (WTI) crude was down $1.42, or 2.9%, to $47.68 a barrel after also climbing 1.5% on Friday to its highest level since February.
Monday’s declines came after oil prices marked seven straight weeks of gains last week as investors focused on the rollout of COVID-19 vaccines.
Reference: Reuters, CNBC
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