Bloomberg
“White House Declares Open Season on the Dollar at Davos.”
Whether or not the White House choreographed the dollar’s slide to the lowest in three years, it may have just declared open season on the currency.
The greenback is caught in the rhetorical cross hairs after Treasury Secretary Steven Mnuchin endorsed the dollar’s decline as a benefit to the American economy at Davos on Wednesday. His comments came days after the U.S. president stepped up his protectionist push by slapping of tariffs on solar panels and washing machines.
“It gives a green light to ongoing dollar weakness as far as the market is concerned,” said Shahab Jalinoos, global head of foreign-exchange trading strategy at Credit Suisse Group AG in New York. “As long as these kinds of messages are presented it allows the market to imagine that’s what the administration wants to see. It validates the idea that further weakness is possible.”
“Obviously a weaker dollar is good for us as it relates to trade and opportunities,” Mnuchin told reporters in Davos. The currency’s short-term value is “not a concern of ours at all,” he said. Bloomberg’s dollar index slumped 0.8 percent as of 9:23 a.m. in New York.
Stuart Bennett, head of Group-of-10 currency strategy at Banco Santander SA, said the comments show the White House may be ready to use the currency as part of its trade agenda.
“The forum and the context are crucial in sending a message that at a minimum, the U.S. views dollar weakness as benign and in the short term, potentially even favorable,” said Alan Ruskin, global co-head of foreign-exchange strategy at Deutsche Bank. “The dollar’s obviously been trading awfully to even what might be good news for some time now. It’s clear its more responsive anyway to negative news at this moment.”
Reuters
“Democrats withdraw offer to fund Trump’s border wall.”
Democrats said on Tuesday they had withdrawn an offer to fund U.S. President Donald Trump’s border wall, as tough negotiations over the future of young illegal immigrants known as “Dreamers” resumed in the Senate.
The Congressional Hispanic Caucus expressed fears on Tuesday that Republicans in the House of Representatives would pursue a harsh immigration bill written by Judiciary Committee Chairman Bob Goodlatte.
The House measure would allow Dreamers to renew their legal status for three years, instead of putting them on a pathway to citizenship, and would call for hiring 10,000 more agents at U.S. borders while shutting down some visa programs and taking other steps to find people who are in the country illegally.
As a result, Trump has been forced to ask Congress for U.S. taxpayer funds for the wall. Government estimates are that it could cost more than $21 billion. With Democrats and many Republicans arguing there are more effective border enforcement tools than a wall, the proposal has become a major sticking point in immigration negotiations, which in turn have complicated talks about funding federal agencies.
Democrats have been spearheading an effort to protect about 700,000 young Dreamers after Trump announced in September the end of the Deferred Action for Childhood Arrivals, or DACA, program instituted by his Democratic predecessor, Barack Obama.
Trump himself has vacillated on immigration between tough rhetoric demanding a U.S. border wall and a softer tone urging a “bill of love” for Dreamers. “Nobody knows for sure that the Republicans & Democrats will be able to reach a deal on DACA by February 8, but everyone will be trying,” Trump tweeted.
BBC News
“UK unemployment falls to 1.44 million.”
UK unemployment fell by 3,000 to 1.44 million in the three months to November, official figures show. The number of those in work increased sharply and wages rose at their fastest rate in almost a year, the Office for National Statistics said.
That leaves the UK’s unemployment rate at a four-decade low of 4.3%. But the growth in wages at 2.4% remained below inflation at 3.1% in November, leaving real wages lower for than a year earlier.
«Demand for workers clearly remained strong,» said ONS statistician David Freeman.
«Nevertheless, inflation remains higher than pay growth and so the real value of earnings continues to decline.» The pace of job creation was faster than economists had predicted. The ONS said the number of people in work rose by 102,000 in the three months to November, taking total employment to a record 32.2 million.
Higher consumer price inflation, due to weaker sterling, has left real pay 0.5% lower than a year earlier, but rising wages are beginning to close the gap.
«Today’s jobs numbers once again strongly suggest that the UK economy is on a firmer footing than many had anticipated following the EU referendum vote,» commented James Athey, senior investment manager at Aberdeen Standard Investments.
Bloomberg
“Dalio Says Bonds Face Biggest Bear Market in Almost 40 Years.”
Billionaire hedge-fund manager Ray Dalio said that the bond market has slipped into a bear phase and warned that a rise in yields could spark the biggest crisis for fixed-income investors in almost 40 years.
“A 1 percent rise in bond yields will produce the largest bear market in bonds that we have seen since 1980 to 1981,” Bridgewater Associates founder Dalio said in a Bloomberg TV interview in Davos on Wednesday. We’re in a bear market, he said.
A Treasury selloff extended following Dalio’s comments, pushing 10-year yields through 2.65 percent, near the highest since mid-2014.
Dalio predicted that the Federal Reserve will tighten monetary policy faster than they have signaled, and said that economic growth is in the late stage of the cycle but could continue to improve for another two years. The current economic environment is good for stocks but bad for bond investors, said Dalio, who’s chairman of Bridgewater, the world’s biggest hedge fund.
“It feels stupid to own cash in this kind of environment. It’s going to be great for earnings and great for stimulation of growth,” he said.
That spurt will last for about 18 months and the central bank will then feel like it has to tighten monetary policy faster than the discounted yield curve, he said. That will be a negative for asset prices, he said.
Demand for bonds will fall as central bankers reduce monetary stimulus, but larger deficits mean that governments will need to sell more of the securities to raise money, Dalio said. That supply-demand imbalance will concern the central bankers, he said.