Safe-haven dollar dips as risk appetite improves
The dollar drifted lower in Asian trade on Thursday as demand for safe haven currencies remained subdued after a rebound in global equities, while the euro strengthened on hopes for a resolution of Italy’s budget dispute.
The dollar had been actively bid over the last two trading sessions as risk appetite receded on fears over a global growth slowdown and the U.S.-Sino trade conflict.
The dollar index, a measure of its value versus six major peers, eased 0.1 percent to 96.62 on Thursday. The index lost 0.13 percent in the previous trading session.
Analysts believe the medium-term direction of the dollar will be decided by the monetary tightening path of the Federal Reserve.
The Fed is expected to announce its fourth rate hike of 2018 in December, but investors are beginning to question how many rate hikes the Fed can implement next year without risking a slowdown in the U.S., which has held up well so far even as borrowing costs have risen.
According to a Reuters poll published on Tuesday, a median of analysts’ forecasts show three more increases next year, taking the federal funds rate to 3.00-3.25 percent by end-2019. But the third rate rise is a close call.
The poll also showed economists have increased the probability of a U.S. recession in the next two years to a median 35 percent.
“The Fed is widely expected to hike in December.. but this meeting is getting a lot more focus as market is looking for any change in forward guidance,” said Sim Moh Siong, currency strategist at Bank of Singapore.
Sim added that while Bank of Singapore’s house view was still for the Fed to hike four times in 2019, any change in the policymakers’ ‘dot plot’ projections would prompt significant repricing in the markets.
Last week, Fed Vice Chair Richard Clarida and Dallas Fed President Robert Kaplan raised concerns over a potential global slowdown that has markets betting heavily that the rate-hike cycle is on its last legs, even as the senior central bankers still signaled further interest rate increases ahead.
GBP/USD Price Forecast – GBP/USD Trades Flat Near Weekly Lows on Holiday Thin Market
The GBP/USD is seeing choppy action in Thursday’s pre-London market session, bouncing between 1.2770 and 1.2790, with thin liquidity on the cards as GBP traders await further developments on Brexit as US markets are on thanksgiving holiday. European-theater market flows will be deciding the Cable’s direction, with a thinned-out economic calendar on the offering for Thursday, though a late-session speech from the Bank of England’s (BOE) Michael Saunders, a voting member of the BOE’s Monetary Policy Committee, will be dropping on markets around 20:55 GMT. As of writing this article, the GBP/USD pair is trading flat at 1.2784 up by 0.05% on the day and has maintained range bound price action for third consecutive session near weekly lows as Brexit deal continues to face problems over Spain’s claim on Gibraltar and unresolved Irish Border issue.
PM May To Visit Brussels For Further Talks Before Official Meet As New Issues Continue Popping Up
Speaking at the Annual South West Economics Dinner, Saunders could drive market reactions with his words as an MPC-voting member, especially with US money absent from Thursday’s US trading session as American institutions observe the US Thanksgiving holiday. Brexit continues to lead front-and-center for Sterling traders, and investors hoping for firmer details from Prime Minister Theresa May’s Wednesday meeting with the European Commission’s Jean-Claude Juncker. After meeting Juncker for one hour and 50 minutes, May announced that she will return to Brussels for last minute talks on Saturday, just a day before EU leaders are due to sign off on the deal which wasn’t on the card before and could provide some volatility for rest of today and tomorrows trading sessions over speculation and headlines which could shed light on what the meeting will be about and what was discussed during yesterday’s meeting.
“We have given direction to our negotiators this evening. The work on those issues will now start immediately,” May told the BBC. “I believe we have been able to give sufficient direction for them to be able to resolve those remaining issues.” If they don’t, there’s a chance EU leaders could cancel the gathering, which would deal a major blow to May’s hopes of concluding the negotiations by the end of November. Britain is due to exit the bloc of 28 countries on March 29, with or without a deal. The EU’s two most powerful countries, Germany and France, are divided over the Sunday summit. While German chancellor Angela Merkel refuses to attend unless the deal is already sealed, French President Emmanuel Macron wants the opportunity to discuss the text himself, rather than leave it to lower-level officials. Expected support and resistance for the pair are at 1.2765, 1.2725, 1.2680 and 1.2810, 1.2845, 1.2890 respectively.
Stock Market News
Nissan board meets to end Ghosn’s two-decade rule
Nissan Motor Co will hold a board meeting on Thursday to oust Chairman Carlos Ghosn after the shock arrest of its once-revered leader, ushering in a period of uncertainty for its 19-year alliance with Renault.
The Franco-Japanese alliance, enlarged in 2016 to include Japan’s Mitsubishi Motors (7211.T), has been rattled to its core by Ghosn’s arrest in Japan on Monday, with the 64-year-old group chairman and industry star accused of financial misconduct.
Ghosn had shaped the alliance and was pushing for a deeper tie-up including potentially a full Renault-Nissan merger at the French government’s urging, despite strong reservations at the Japanese firm.
Japanese prosecutors said Ghosn and Representative Director Greg Kelly, who has also been arrested, conspired to understate Ghosn’s compensation at Nissan over five years from 2010, saying it was about half the actual 10 billion yen.
Nissan’s board meeting will be held sometime after 4:00 p.m. (0700 GMT) at its headquarters in Yokohama and the company is likely to issue a statement afterwards, one senior Nissan official told reporters on Wednesday, requesting anonymity as the details were confidential.
Renault executives are expected to join by video conference.
Japanese media said that given Nissan’s board composition Ghosn’s removal from the post is expected to be approved.
Nissan executives have five seats on the nine-member board, Renault loyalists have two seats and the remaining two are held by unaffiliated outside directors, a former bureaucrat and a race driver.
With Ghosn and Kelly still in detention, neither of the men will be able to vote or defend themselves at the meeting. A majority vote by the remaining seven members of board will be sufficient to strip them of their positions.
Renault has refrained from firing Ghosn as chairman and CEO, although he remains in detention along with Kelly, whom Nissan also accuses of financial misconduct.
But Mitsubishi Motors plans to remove Ghosn from his post of chairman at a board meeting next week.
Amid growing uncertainty over the future of the alliance, Japan’s industry minister and France’s finance minister are due to meet in Paris on Thursday to seek ways to stabilize it.
“For me, the future of the alliance is the bigger deal,” said the Nissan official, when asked about Ghosn’s arrest. “It’s obvious that in this age, we need to do things together. To part would be impossible.”
Tesla cuts China car prices to absorb hit from trade war tariffs
- The move comes amid severe trade tensions between China and the United States, which has seen extra tariffs slapped on U.S. imports into the country, including automobiles, hurting Tesla which imports all the cars it currently sells in the market.
- The electric carmaker, led by billionaire CEO Elon Musk, said it will cut prices of the two models by 12 percent to 26 percent to make the cars more “affordable” in the world’s top auto market, where sales of so-called new-energy vehicles are rising fast.
Tesla is cutting the price of its Model X and Model S cars in China, the U.S. firm said on Thursday, in a shift in strategy that will see it take more of a hit from tariffs linked to a biting trade war between China and the United States.
The electric carmaker, led by billionaire CEO Elon Musk, said it will cut prices of the two models by 12 percent to 26 percent to make the cars more “affordable” in the world’s top auto market, where sales of so-called new-energy vehicles are rising fast.
The move comes amid severe trade tensions between China and the United States, which has seen extra tariffs slapped on U.S. imports into the country, including automobiles, hurting Tesla which imports all the cars it currently sells in the market.
“We are absorbing a significant part of the tariff to help make our cars more affordable for customers in China,” Tesla said in a statement sent to Reuters.
The move marks a shift from July when Tesla was one of the first U.S. carmakers to raise prices in the market in response to tariffs. The firm hiked prices then on its Model X and S cars by about 20 percent.
Tesla warned last month it was facing major problems with selling cars in China due to new tariffs that would force it to accelerate investment in its first overseas Gigafactory in Shanghai.
The carmaker last month secured the site for the facility, which will help it avoid steep import tariffs.
The firm, which recently launched pre-sales of its new Model 3 car in China, added in its statement that the car’s pricetag would start from 540,000 yuan ($77,928.83) for a dual motor all-wheel drive version, and 595,000 yuan for a performance version.
Before the price hike in July, Tesla had lowered prices on its models in China in May, after Beijing had said it would cut import tariffs for all auto imports.
Crypto Prices Flat; Saudi Arabia to Launch its Own Virtual Coin in 2019
Cryptocurrency prices were flat on Thursday, with Bitcoin hovering near the $4,500 mark. Although not a major directional driver, reports said Saudi Arabia is launching its own virtual coin in 2019.
Bitcoin slipped 0.2% to $4,596.5 by 12:05 AM ET (05:05GMT) on the Bitifinex exchange. The world’s largest digital coin has now lost more than 25% of its value within a week.
XRP inched up 0.1% to $0.44609 on the Poloniex exchange.
Ethereum rose 0.2% to $137.28, while Litecoin gained 1.9% to $34.859 on the Bitifinex exchange.
Live Bitcoin News reported on Thursday that Saudi Arabia and the United Arab Emirates are together developing a cryptocurrency that is set to be launched in mid-2019. The official name of the virtual coin is not revealed, and not too much is known about the currency at the moment, the article noted, adding that the Saudi Arabian Monetary Authority is still investigating the feasibility of such a currency.
This currency will have the backing of the Saudi central bank and a “limited number of banks,” the article said.
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