U.S. Dollar Steadies as IMF’s New Warning Supports Safe-Haven Demand
The U.S. dollar steadied on Tuesday in Asia after the International Monetary Fund (IMF) cut its 2019 and 2020 global growth forecasts overnight.
The IMF now projects a 3.5% growth rate worldwide for 2019 and 3.6% for 2020. These are 0.2 and 0.1% points below its last forecasts in October.
The fund cited China-U.S. trade disputes, a renewed tightening of financial conditions, a “no deal” Brexit and a deeper-than-anticipated slowdown in China as the reasons for the downgrade.
The news came just hours after China reported its slowest quarterly economic growth since the financial crisis on Monday.
China’s economy grew 6.4% in the fourth quarter of 2018 from a year earlier, as expected, official data from the National Bureau of Statistics showed on Monday. The growth was slower than the previous quarter’s 6.5% growth.
Full-year growth for 2018 came in at 6.6%, also in line with expectations.
The U.S. dollar index edged up 0.1% at 96.058 on Tuesday following the news.
Traders are also awaiting further news on the U.S.-China trade development, as Chinese Vice Premier Liu He is set to visit the U.S. on Jan. 30 and 31 for a new round of trade talks.
The Japanese yen, another safe-haven currency, also rose on Tuesday as the USD/JPY pair lost 0.2% to 109.43.
Meanwhile, the Chinese yuan was up 0.2% to 6.8022 as the People’s Bank of China set the yuan reference rate at 6.7854 vs the previous day’s fix of 6.7774.
Analysts at Morgan Stanley (NYSE:MS) said in a Reuters report last week that they had turned bullish on the yuan, as they believed the People’s Bank of China (PBOC) would refrain from intervening during trade talks.
Companies would also sell more dollars to buy yuan ahead of the upcoming Lunar New Year payments, the analysts added.
Elsewhere, the AUD/USD pair and the NZD/USD pair slipped 0.3% and 0.1% respectively.
GBP/USD Price Forecast – UK Macro Data To Decide Short Term Price Course For GBP
Demand for USD following IMF growth forecast update limits GBP’s upside move as traders await UK macro data for direction cues to trade in the short term.
GBPUSD breached 1.29 handle once again yesterday as news of plan b action proposed by PM May in UK parliament hit the market. As per headlines, no clear details on plan b was given expect from certain facts which hinted that new course of action is very similar to plan A. PM May has stated she will meet with EU officials once again to try and iron out Irish backstop issue but she stands clear on her stance that no-deal Brexit will not be taken off the table and her government won’t allow a second Brexit referendum. With just 67 days remaining in the deadline, PM May’s plan B is set to be voted on UK Parliament during January 29, 2019. While News of plan B has helped British Pound retain its bullish bias in the broad market and helped move above 1.29 handle, further sharp upside move was prevented owing to increased demand that US Greenback yesterday.
IMF Growth Forecast Update Underpinned USD Bulls Limiting GBP’s Upside Move
US dollar bulls saw some level of positive action as International Monetary Fund (IMF) reduced its global growth forecast for 2019 for the second time in the last six months. Global growth worries combined with increasing uncertainties surrounding Brexit proceedings underpin demand for USD in the broad market yesterday. As of writing this article, GBPUSD pair is trading at 1.2877 down by 0.10% on the day. The vote in UK parliament later this month is a major hurdle for Brexit proceedings as headlines hint at a possible move by Labor party leader Jeremy Corbyn that will give MP’s the power to decide the fate of Brexit. Having met with strong resistance above 1.29 handle, the pair eased slightly from previous session gains and is trading steadily above mid 1.28 handle ahead of today’s London market hours.
In immediate future, investors focus is on today’s macro data outcome that will decide short term outlook of GBP in the broad market. On release front today, UK market will see the release of Unemployment Rate, Employment Change, Claimant Count Change, and Average Earnings Index + Bonus data. A positive outcome in UK’s macro data will solidify GBP’s foothold above 1.28 handle while dovish outcome will result in British Pound seeing some downside action. Meanwhile US market will see the release of Existing home sales data for December 2018 but it is unlikely to have any major impact on price action as Brexit headlines remain the main driving force behind the pair’s price momentum.
Stock Market News
Tokyo court denies latest bail request of Nissan’s Ghosn
Carlos Ghosn’s latest request for bail was rejected by a Tokyo court on Tuesday, despite the ousted Nissan chairman offering to wear an electronic ankle tag in an unusual bid to win release after two months of detention for alleged financial crimes.
The ruling, widely anticipated, raises the likelihood that the 64-year-old executive will remain in custody until his trial, and will put pressure on Nissan’s (7201.T) French partner Renault SA (RENA.PA) to find his successor as chairman and CEO.
Renault’s board is expected to meet in the coming days to decide who will succeed Ghosn, essentially removing him from the three-way alliance – which also includes Mitsubishi Motors (7211.T) – which has been in turmoil since his arrest.
Ghosn was almost immediately ousted from the chairmanship of Nissan and Mitsubishi after his initial arrest on Nov. 19, but remains chairman and CEO of their French partner.
He has been officially charged for under-reporting his salary for eight years through March 2018 and temporarily transferring personal financial losses to Nissan’s books. Ghosn denies the charges.
The court did not give a reason for the denial. Bail is rarely granted for defendants in Japan without a confession.
Ghosn’s lawyer was not immediately available for comment after the Tokyo District Court announced its decision.
Ghosn’s latest bail request had also included an offer to hire guards to monitor him and a promise to remain in Tokyo, where he has leased an apartment. He offered to post stock he owns in Nissan as collateral, his spokeswoman said.
An earlier request for bail was denied last week due to concerns the executive, who holds French, Lebanese and Brazilian citizenship, was a flight risk, and that he may tamper with evidence if released.
In a statement released on Monday, Ghosn repeated his intent to clear his name in court.
“I will attend my trial not only because I am legally obligated to do so, but because I am eager to finally have the opportunity to defend myself,” he said.
“I am not guilty of the charges against me and I look forward to defending my reputation in the courtroom.”
U.S. Still Seeking Huawei CFO’s Extradition, Canada Envoy Says
The U.S. has indicated it will pursue the extradition of a top Huawei Technologies Co. executive, Canada’s ambassador to Washington said, suggesting the case might not be resolved in trade talks with China.
Ambassador David MacNaughton confirmed in an email Monday that U.S. officials have continued to signal an intent to follow through on the case against Huawei Chief Financial Officer Meng Wanzhou. The Globe and Mail newspaper earlier cited an interview with MacNaughton saying that the U.S. has notified the Canadian government of plans to file a formal extradition request before a Jan. 30 deadline.
Meng, the daughter of the Chinese telecommunication giant’s founder, was arrested at the behest of the U.S. last month over allegations of bank fraud related to sanctions against Iran. She has denied wrongdoing and is restricted to staying in Vancouver while awaiting further court hearings.
The case, and China’s subsequent detention of two Canadian nationals, has prompted a diplomatic feud between Ottawa and Beijing, with each side accusing the other of arbitrary law enforcement. The dispute was complicated by a Trump interview with Reuters on Dec. 11, in which he said he would intervene in the case, if he “thought it was necessary” to close a trade deal with China.
The deadline falls on the same day that China’s top economic official, Vice Premier Liu He, is due to arrive in Washington for talks with Treasury Secretary Steven Mnuchin and Trade Representative Robert Lighthizer. Huawei has been a central concern of U.S. efforts to protect intellectual property rights and secure sensitive data systems.
Still, Canadians in China have suffered the most since Meng’s Dec. 1 arrest. China detained Michael Kovrig and entrepreneur Michael Spavor on suspicion of activities endangering national security while another Canadian, Robert Schellenberg, saw his drug-smuggling sentence increased to death from 15 years in prison.
MacNaughton told the Globe and Mail he had voiced Canada’s anger to the Trump administration over the dispute.
“We don’t like that it is our citizens who are being punished,” MacNaughton said in the interview.
Crypto CEO Sentenced to 3-Year Jail Term for Faking Trading Volume
Two executives from South Korean crypto exchange Komid have been handed down jail time for faking trading volume and deceiving investors.
According to a report from CoinDesk Korea, the firm’s CEO Hyunsuk Choi received a three-year sentence for his role in the crime, as well as for embezzlement. Another member of the team, Park Mo, got two years, according to local news source Blockinpress.
Choi, the court found, made a number of fake accounts on the exchange in January 2018, and, using a trading bot, made millions of false transactions with cryptocurrency and Korean won credit that did not actually exist.
The court – presided over by South Korea’s top judge Ahn Seong-joon – also ruled that Choi had transferred bitcoin from the exchange to an external wallet, said CoinDesk Korea.
According to Blockinpress, which added that the crime brought in around $45 million in fees, the judge said:
“Choi has committed fraud for a countless number of victims for a long period of time … Futhermore, he holds the financial authorities responsible for failing to keep track of the industry better.”
Choi was reportedly arrested after the sentencing hearing.
In April, South Korean police detained four executives from two cryptocurrency exchanges over alleged embezzlement. One of those questioned was the CEO of Coinnest, while the identities of the other executives and the other exchange were not made public at the time.
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