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US dollar keeps the momentum going

Bloomberg dollar index at 7-week high

The DXY is the standard dollar index but it’s weightings are flawed, which is why I prefer the Bloomberg Dollar Index and its trade-weighted nature.
It highlights how the US dollar has climbed from a three-month low at the start of the month to a seven-week high in a steady rally.
It’s up once again today despite the US holiday as the antipodeans and pound slide.
Bloomberg dollar index at 7-week high
I don’t like to do technical analysis on an index but there isn’t much standing in the way of a further rally.
The kicker for me right now is that yields haven’t offered much support. US 10s are at 1.76% and that’s down from nearly 2% three weeks ago. The market continues to price in a 50% chance of a Fed cut by next July and I think as that comes out, there’s more upside for the dollar — especially against the funding currencies (JPY, CHF, EUR).

Israel central bank markets chief says shekel too strong; intervention more suitable than rate cuts

Comments from Bank of Israel’s Abir

  • Shekel appreciation would make it tougher for inflation to move back to 1-3% annual target
  • Rate cuts remain on the table but other tools can be used that will have more impact
  • Barrier to reducing rates below zero is much higher than reducing it to 0.1% or zero
  • Limited room on rate cuts but unlimited room on buying US dollars
  • Forex intervention also aimed at introducing volatility into the market
Those are some intriguing comments.

North Korea tests missiles a month ahead of deadline for US talks

Breaking a month-long lull in missile tests, North Korea fired two short range missiles into the sea off its east coast on Thursday in what appeared to be the latest try out of its new multiple rocket launchers, South Korea’s military said.

The test-firing came as the clock ticks down on the year-end deadline that Pyongyang had given the United States to restart stalled denuclearisation talks.

South Korea’s Joint Chiefs of Staff (JCS) said the North fired the two missiles into the sea from launchers in the eastern coastal town of Yonpo at around 5 p.m. (0800 GMT).

The rockets travelled up to 380 kilometres (236 miles) and reached an altitude of 97 km (60 miles), the JCS said.

Japanese Prime Minister Shinzo Abe said the launch was a threat to not only Japan but the region and beyond, though his defence ministry said the projectile did not enter Japanese airspace or its Exclusive Economic Zone.

“We will remain in close contact with the United States, South Korea and the international community to monitor the situation,” Abe told reporters. (more…)

Chinese state council says will step up punishment for IP infringement

Comments via Xinhua

China
  • Will step up policy support for trade development
  • Will lower non-tariff trade barriers
  • Will further accelerate efforts to build exports control system to manage trade risks
  • Will properly resolve trade frictions
  • Will further widen market access for foreign capital
Can’t really help to think that the comments above are no coincidence to the timing of the situation after the HK bill. If anything, I reckon China wants to impose their authority to make sure the US knows that they can’t simply mess with China’s internal affairs.
However, at the same time, they are also seemingly not going to push the relationship until it breaks and that there is still some gesture of goodwill to try and get to a “Phase One” deal. The question now is, can both sides see eye to eye long enough to make it work?

Global Times editor: China considering to put drafters of HK bill on no-entry list

A tweet by Global Times’ editor-in-chief, Hu Xijin

“Based what I know, out of respect for President Trump, the US and its people, China is considering to put the drafters of the Hong Kong Human Rights and Democracy Act on the no-entry list, barring them from entering Chinese mainland, Hong Kong and Macao.”

I reckon that is probably one part of possible retaliatory measures but in any case, it should be viewed as a rather soft one – but the spin on the response above is that it is done “out of respect for Trump and the US”.
As such, this leads me to believe that the signing of the HK bill isn’t quite putting the “Phase One” deal in jeopardy just yet.

OPEC expects the oil market to be balanced in 2020 if it maintains current production levels

This according to data presented in Vienna to the bloc’s Economic Commission Board this week

OPEC

According to delegates, it shows that an oil supply surplus in 1H 2020 will be mostly offset by a deficit in 2H 2020. As such, the bloc sees that the oil market will be balanced next year and that puts them on course to stick with the current set of output cuts.

Do be reminded that OPEC will be meeting next week to finalise their decision but the expectation is for them to maintain the existing output cuts (due to expiry in March 2020) into the latter stages of next year.
The report by Bloomberg above only serves to reaffirm that notion with a mention that the bloc’s secretariat did not examine the prospect of deeper cuts.