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Forex News

U.S. economic growth in 2018 misses Trump’s 3 percent target


The U.S. economy fell short of the Trump administration’s 3 percent annual growth target in 2018 despite $1.5 trillion in tax cuts and a government spending blitz, and economists say growth will only slow from here.

A better-than-expected performance in the fourth quarter pushed gross domestic product up 2.9 percent for the year, just shy of the goal, Commerce Department data showed on Thursday.

President Donald Trump has touted the economy as one of the biggest achievements of his term and declared last July that his administration had “accomplished an economic turnaround of historic proportions.” On the campaign trail, Trump boasted that he could boost annual economic growth to 4 percent, a goal that analysts always said was unachievable.

“We are moving back to a sustainable growth pace that we experienced during most of the Obama years,” said Joel Naroff, chief economist at Naroff Economic Advisors in Holland, Pennsylvania. “With the tax cut impacts largely done with, it is hard to see how growth can accelerate sharply.”

Gross domestic product increased at a 2.6 percent annualized rate in the fourth quarter after advancing at a 3.4 percent pace in the July-September period. Economists polled by Reuters had forecast GDP rising at a 2.3 percent rate in the fourth quarter.

Growth in 2018 was the strongest since 2015 and better than the 2.2 percent logged in 2017. The expansion will be the longest on record in July.

The stronger-than-expected fourth-quarter performance, which reflected solid consumer and business spending, was despite many headwinds, including financial market volatility and the United States’ trade war with China, raising optimism that an anticipated slowdown this year would not be abrupt.

The fiscal stimulus is believed to have peaked sometime in the fourth quarter. December economic data such as retail sales, exports, homebuilding and business spending on equipment weakened sharply.

In addition, most manufacturing measures softened in January and February, and motor vehicle demand has eased.

The labor market is also exhibiting signs of cooling, with a report from the Labor Department on Thursday showing the number of Americans receiving unemployment benefits rising to a 10-month high in the week ended Feb. 16.

“The first quarter won’t be this good,” said Paul Ashworth, chief economist at Capital Economics in Toronto. “As the stimulus fades and the lagged impact of past monetary tightening continues to feed through, we expect GDP growth to slow to 2.2 percent this year.”

Slowing growth together with weakening global demand and uncertainty over Britain’s departure from the European Union, support the Federal Reserve’s “patient” stance towards raising interest rates further this year. Fed Chairman Jerome Powell reaffirmed the U.S. central bank’s position in his testimonies before lawmakers on Tuesday and Wednesday.

Inflation was largely muted in the fourth quarter.

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USD/JPY rallies to 10-week high as Powell’s comments, China data favored risk-on


  • USD/JPY rose to the 10-week high during early Friday
  • The pair benefited from latest risk-on moves after China’s Caixin manufacturing PMI and comments from the Fed’s Powell
  • Successful trading above 111.30/40 highlights 112.00 and 112.20 resistances with 110.90 and 110.50 be the following levels to watch past downside break of 111.30

USD/JPY is taking bids around 111.80 during early Asian sessions on Friday. The pair is at the ten-week high as upbeat comments from the Fed Chairman Jerome Powell and welcome data concerning China Caixin manufacturing PMI triggered risk-on sentiment. The pair earlier slipped on better than forecast Tokyo Core CPI figure.

At the start of Friday, the Bank of Japan’s (BoJ) preferred version of inflation gauge, Tokyo Consumer Price Index (CPI) ex Fresh Food increased 1.1% in February against 1.0% forecast on a yearly basis. The release helped limit the pair’s gains during initial trading hours.

However, comments from the Fed Chair Powell mentioning that the US economy is in good shape and continued emphasis on patience for the monetary policy helped trigger the pair’s upside. The pair then managed to extend the rise after China’s Caixin Manufacturing purchasing managers’ index (PMI) as the gauge rose to 49.9 in February compared to 48.5 consensus and 48.3 prior.

While recent risk-on fuelled the USD/JPY pair to ten-week high, traders still face uncertain times when it comes to the US-China deal. Also, the release of US ISM Manufacturing PMI may offer intermediate trade opportunities. The February month ISM Manufacturing PMI is expected to soften to 55.5 from 56.6.

USD/JPY Technical Analysis

Given the pair’s successful trading beyond 111.40 resistance, chances of its additional rise to 112.00 and then to the 112.20 can’t be denied. Though, 112.65 and 113.00 may challenge the buyers afterward.

If the pair drops under 100-day simple moving average (SMA) level of 111.40, also slips under 200-day SMA level of 111.30, 110.90 and 110.50 could lure the sellers.

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Stock Market News

U.K. stocks lower at close of trade; United Kingdom 100 down 0.33%


U.K. stocks were lower after the close on Thursday, as losses in the Automobiles & Parts, Forestry & Paper and Mining sectors led shares lower.

At the close in London, the United Kingdom 100 declined 0.33%.

The best performers of the session on the United Kingdom 100 were St. James’s Place PLC (LON:SJP), which rose 3.31% or 31.20 points to trade at 972.40 at the close. Meanwhile, ITV PLC (LON:ITV) added 3.03% or 3.85 points to end at 131.10 and Marks and Spencer Group PLC (LON:MKS) was up 2.86% or 7.60 points to 273.00 in late trade.

The worst performers of the session were EasyJet PLC (LON:EZJ), which fell 6.41% or 84.00 points to trade at 1227.50 at the close. Mondi PLC (LON:MNDI) declined 6.31% or 116.50 points to end at 1728.50 and BHP Group PLC (LON:BHPB) was down 3.13% or 56.40 points to 1746.00.

Falling stocks outnumbered advancing ones on the London Stock Exchange by 1123 to 937 and 328 ended unchanged.

Gold Futures for April delivery was down 0.37% or 4.85 to $1316.35 a troy ounce. Elsewhere in commodities trading, Crude oil for delivery in April rose 0.30% or 0.17 to hit $57.11 a barrel, while the May Brent oil contract fell 0.42% or 0.28 to trade at $66.30 a barrel.

GBP/USD was down 0.33% to 1.3264, while EUR/GBP rose 0.47% to 0.8582.

The US Dollar Index Futures was down 0.00% at 96.037.

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Elon Musk thinks layoffs will keep Tesla profitable as $35,000 Model 3 arrives


Nearly three years after Elon Musk promised a $35,000 Model 3 electric car, Tesla Inc. has finally delivered. Now, the question is about the promise of profitability Musk has been making for the past few months.

Musk walked back his goal of being thinly profitable in the first quarter and in the black in every quarter thereafter in a conference call Thursday, saying Tesla will not be profitable this quarter and that it is only “likely” that it will be in the black in the second quarter. Tesla shares, which were halted ahead of the official announcement, fell 3.3% in the extended trading session Thursday afternoon.

As Tesla has delayed selling the Model 3 at the price Musk promised at a gala event in April 2016, analysts have grown concerned about a financial quandary: The electric-car company may not be able to turn a profit at the lower price, but it could lose many prospective customers who only wanted the $35,000 version. Musk’s answer to that problem is cutting employees, just as Tesla already did earlier this year and midway through last year while trying to form a consistently profitable company.

Tesla announced Thursday that it would move to an online-only sales model, turning any retail stores that executives decide to keep into “galleries” and “showrooms” while laying off retail employees. In a blog post and conference call with the media Thursday afternoon, Tesla directly linked that move to an ability to reduce the prices on its cars by an average of 6%.

“I wish there was some other way, but unfortunately it will entail some reduction in force on the retail side,” Musk said in the call, in which he also suggested that sales in states that had blocked Tesla’s direct-sales model could get a boost from moving to an online-only model.

Don’t miss: Tesla finally launches $35,000 Model 3, and moves all sales online

While a straight cut of retail employees could help balance the reduced price tag, Musk also said Thursday that Tesla will “be significantly increasing headcount in service technicians” to service all the cars it is selling, which could easily negate those cost savings. There could be unintended consequences as well, as Tesla salespeople may be talking potential customers into sales that will disappear once their number is greatly reduced.

These are just some of the many questions left after Thursday’s event, which Musk had teased on Twitter with scant details amid yet another dustup with the Securities and Exchange Commission. Musk largely avoided financial questions in particular, telling a reporter who asked directly what the margin would be on the $35,000 Model 3, “We’re not gonna answer questions like that.”

Musk was more receptive to questions about demand for the Model 3. He guessed that demand could exist for 500,000 cars a year, and admitted that Tesla does not know how many of those still holding onto reservations that cost $1,000 will now buy a Model 3 at the price Tesla promised them years ago.

“We first need to assess how many of the longtime reservation holders want the $35,000 car,” Musk said, before promising that customers who order the car now without a reservation would get it before tax credits diminish more at the end of June.

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Cryptocurrency News

Facebook Reportedly Shopping ‘Facebook Coin’ to Crypto Exchanges


Facebook is “hoping to succeed where Bitcoin failed” with its highly secretive cryptocurrency project, a New York Times (NYT) article published today, Feb. 28, argues.

Citing multiple anonymous sources who spoke on the condition of anonymity, the Times pieces together the alleged contours of the project, which will reportedly aim to integrate cryptocurrency payments into its messaging services.

Notably, Facebook plans to rehaul its messaging infrastructure and integrate its three wholly-owned apps — WhatsApp, Messenger and Instagram — under one canopy. As the Times notes, this would provide a future crypto token with exposure across the combined 2.7 billion who use the three services each month.

A crypto-powered payments system that would operate from within a messaging system, the Times notes, is an idea being hotly pursued by several global messaging giants, such as Korea’s Kakao, Line in Japan, and Russian-developed Telegram.

According to NYT, Facebook launched its crypto project — led by ex-PayPal president David Marcus — shortly after Telegram had sealed close to $1.7 billion in two private initial coin offering (ICO) rounds for its forthcoming token and blockchain platform Telegram Open Network (TON).

Facebook has reportedly employed over 50 engineers to develop its cryptocurrency, three unnamed sources told the NYT. A further two told the newspaper that the importance of keeping the project under wraps is such that the relevant team has been given an office with separate key-card access to keep the details private from other employees.

Notably, five sources claiming to have been briefed on the team’s work alleged the forthcoming coin was most likely to be a fiat-pegged stablecoin — tied to the value of three different national fiat currencies, rather than just one.

The NYT notes, citing the anonymous sources, that Facebook has already begun shopping the “Facebook coin” around to unnamed crypto exchanges.

The question of centralization — and how far Facebook will allow its digital coin transactions to be decentralized, remains moot, according to NYT. Moreover, the Times cites industry experts who argued that Facebook is likely to face the same technological limitations and regulatory hurdles that have beset stalwart cryptocurrencies such as Bitcoin (BTC).

As reported, unconfirmed reports of Facebook’s plans to integrate a cryptocurrency for WhatsApp users previously surfaced in December 2018. At the time, anonymous sources similarly suggested the token would be a stablecoin.

The trickle of information about the project aligns with the last year’s job listings for blockchain talent on Facebook’s career page, as Cointelegraph has reported.

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