TradeFred Daily Briefing

In Brief:

  • Sterling pares losses vs USD
  • Profit taking takes the shine off Gold
  • Asian shares & Wall Street stocks rise again
  • Good news for cryptocurrency traders as Bitcoin moves higher

The Yuan rose while the safe-haven Yen fell in Asian trading on Tuesday as trade tensions between the US and China eased. The USD/CNY pair fell 0.3% to 6.8743 by 11:45 PM ET (03:45 GMT). Just two days before the signing of the phase one trade deal, the Trump administration announced that it was removing China from its designation as a currency manipulator. However, China remained on a monitoring list for foreign-exchange practices. The administration praised China for making “enforceable commitments” not to devalue the Yuan. The Chinese currency has now recouped about a third of the losses it sustained against the US Dollar since mid-June 2018.

Elsewhere, the Pound pared some of its losses Monday against the Greenback after falling to a two-and-a-half-week lows as softer UK economic data strengthened expectations for a Bank of England rate cut. GBP/USD fell 0.50% to $1.2994 but had been as low as $1.2961 after data showed unexpected weakness in UK industrial production and GDP data in November. The data followed remarks by Bank of England monetary policy member Gertjan Vlieghe Vlieghe, who said he stood ready to back a rate cut if economic growth failed to improve.

Street protests in Iran or the anticipation of a China deal aren’t swaying oil buyers. Crude prices sunk further for the year on Monday on easing tensions in the Middle East and amid worries that oil could get into another oversupply situation from seasonal lows in consumption. West Texas Intermediate, the benchmark for US crude, settled down 96 cents, or 1.6%, at $58.05 per barrel. Brent, the global benchmark for crude, was down 77 cents, or 1.2%, at $64.21 by 3:55 PM ET (20:55 GMT). Brent hit mid-September highs of $71.75 last week, while WTI surged to an April peak of $64.72, after Iran fired missiles at US airbases in Iraq. Tehran’s action was in response to the US killing of top Iranian general Qassem Soleimani on January 3.

The profit-taking from last week that took some of the froth off Gold’s seven-year highs was back on Monday, as markets continued to operate without fear of another US-Iran blowup. Anticipation of the US-China phase one deal also allowed some risk to creep back into markets, sending stocks on Wall Street to record highs. Gold futures for February delivery on New York’s COMEX settled down $9.50, or 0.6%, at $1,550.60 per ounce. Spot Gold, which tracks live trades in bullion, was down $12.25, or 0.8%, at $1,549.78 by 2:40 PM ET (19:40 GMT). Gold’s strong hold on the $1,500 berth, however, proved its standing as a safe haven against outsized risks, analysts said.

Sovereign bonds in India are set to decline after inflation surged sharply in December to touch a five-year high, casting doubts over any near-term monetary easing. Consumer prices rose 7.35% last month, exceeding the 6.7% median estimate of analysts surveyed by Bloomberg, official data late Monday showed. The inflation jump, largely driven by food prices, risks stalling the recent rally in the nation’s bond markets. With high consumer prices limiting the ability of the Reserve Bank of India to cut rates further to revive economic growth, the government may be forced to spend more.

Asian stocks rose in morning trade on Tuesday after the U.S. dropped China’s currency manipulator label, saying that it has made “enforceable commitments” not to devalue the Yuan. China’s Shanghai Composite inched up 0.1%, while the Shenzhen Component gained 0.3%. US stocks were higher after the close on Monday, as gains in the Basic Materials, Technology and Consumer Goods sectors led shares higher. At the close in NYSE, the Dow Jones Industrial Average rose 0.29%, while the S&P 500 index gained 0.70%, and the NASDAQ Composite index gained 1.04%. The best performers of the session on the Dow Jones Industrial Average were Apple Inc, which rose 2.14% or 6.63 points to trade at 316.96 at the close. Meanwhile, Cisco Systems Inc added 1.78% or 0.84 points to end at 47.97 and Dow Inc was up 1.65% or 0.85 points to 52.35 in late trade.

The UK economy unexpectedly shrank ahead of the general election, casting doubt over whether there was any growth at all in the fourth quarter. The figures will add to concerns at the Bank of England, where officials are debating whether further stimulus might be needed if economic weakness persists. Gross domestic product fell 0.3% in November, the Office for National Statistics said Monday. Economists had expected unchanged output. It means growth of 0.1% to 0.2% was needed in December to prevent the economy contracting in the fourth quarter.

US job growth slowed more than expected in December, but the pace of hiring likely remains sufficient to keep the longest economic expansion in history on track despite a deepening downturn in a manufacturing sector stung by trade disputes. The Labor Department's closely watched monthly employment report on Friday also showed the jobless rate holding near a 50-year low of 3.5%. A broader measure of unemployment dropped to a record low last month, but wage gains ebbed. The mixed report will probably not change the Federal Reserve's assessment that both the economy and monetary policy are in a "good place."

Canada gained a higher-than-expected 35,200 net jobs in December, entirely in full-time positions, while the unemployment rate fell to 5.6%, official data showed on Friday, figures that could ease some concerns about the strength of the Canadian economy. Analysts in a Reuters poll had forecast a gain of 25,000 jobs in December and an unemployment rate of 5.8%. Wages for permanent employees rose by 3.8%, Statistics Canada said, lower than the 4.4% gain seen in each of the previous two months. Canada shed an unexpected 71,200 net jobs in November, the biggest decline since 2009, while the national unemployment rate rose to 5.9%.

Just two years ago, Prime Minister Narendra Modi was helming an economy expanding 8%, spurring optimism India was on a path to become a major global growth driver. Now, stagflation looms as the economy grinds toward its slowest expansion in more than a decade and inflation spikes above the central bank’s target, driven by higher food prices. Social unrest against a restrictive new citizenship law is yet another challenge. There is few good options to deal with the slowdown. Dwindling government revenue and an already-stretched budget limit scope for fiscal support, while the shock 7.35% surge in inflation in December and the threat of higher oil prices mean the door for further interest rate cuts is closing.

The benchmark interest rate that the Federal Reserve focuses on controlling to implement monetary policy has moved closer to the lower bound of its target range, increasing the prospect that the central bank will adjust one of its associated tools later this month. The effective fed funds rate has been moving lower relative to the band since the Fed embarked on a series of repurchase-agreement operations and Treasury-bill buying to quell funding-market turmoil. Upheaval in September briefly saw fed funds rise above the upper bound of the range, but the measures to make more cash available over the turn of the year helped bring it down.

Bitcoin rose above the $8,543.7 threshold on Tuesday. Bitcoin was trading at 8,543.7 by 23:03 (04:03 GMT) on the Index, up 4.94% on the day. The move upwards pushed Bitcoin's market cap up to $153.2B, or 66.64% of the total cryptocurrency market cap. At its highest, Bitcoin's market cap was $241.2B. Bitcoin had traded in a range of $8,112.1 to $8,543.7 in the previous twenty-four hours. Over the past seven days, Bitcoin has seen a rise in value, as it gained 7.27%. It has traded in a range of $7,697.6948 to $8,543.6943 over the same period.