The Financial Daily : 2020-08-22

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Saturday- Sunday, August 22- 23, 2020 Sterling steady vs euro, falls vs dollar on mix of Brexit, strong data the first time in July as the government ramped up public spending to cope with the coronaviru­s pandemic and tax revenues fell. A l arge pile of debt, double deficits and an insecure relationsh­ip with i t s biggest t r ading partner could leave the UK vulnerable to i nvestment outflows and money managers and investors look for better opportunit­ies elsewhere. Sterling was last flat at 89.78 pence versus the euro, after rising to 89.45 pence, its highest since July 10. Sterling was down 0.4% at $ 1.3162 versus the greenback as the dollar i nched higher against t he euro, though it remained close to $ 1.3276, its highest since December 2019. The British pound lost early strength versus the euro on Friday and fell against the rising U. S. dollar as a mix of Brexit worries and better- than- expected British economic data i njected some volatility in the currency. Earlier in the day the pound rose to a 1- 1/ 2- month high versus the euro and inched towards an eightmonth high against the greenback after UK retail sales numbers for July came i n much higher t han expected. Year- on- year sales rose instead of falling as in the previous month while economists polled by Reuters had predicted no growth. Month- onmonth numbers also rose higher than expectatio­ns, though not as much as June. "This is supportive for sterling and given the general weakness of the U. S. dollar, further gains for cable over the short- term are possible," said Derek Halpenny, head of r esearch at MUFG, adding t hat "there will be an obvious high level of caution in reading too much into this impressive performanc­e." On t op of t hat, t he r ecovery among British businesses from the shock of the COVID- 19 pandemic quickened again in August, the IHS Markit/ CIPS UK Composite Purchasing Managers' Index ( PMI) showed on Friday. The index shot up to a nearly seven- year high of 60.3 from 57.0 in July, far above the 50 threshold for growth, keeping sterling supported. "The broadly positive news will help keep the sterling rally alive, however is unlikely to have any material impact as markets drift into the weekend. Many participan­ts will be happy to sit on the sidelines after a busy week for sterling/ dollar," said Sam Cooper, Vice President of Market Risk Solutions at Silicon Valley Bank. The mood soured after t he European Union's chief Brexit negotiator said negotiatio­ns with Britain on a future relationsh­ip did not move significan­tly forward in the latest round of talks this week. Also on Friday came news that Britain's public debt went above 2 trillion pounds ($ 2.65 trillion) for LONDON: Oil prices dip on sluggish coronaviru­s recovery Bosnia's fruit growers prove resilient amid pandemic downturn Euro sinks as business rebound stutters in August Bosnia Plum season is upon us, and in the orchards of northern Bosnia fruit growers are busy with the harvest, most of which will be processed at local factories and shipped to buyers in the European Union and Russia. Despite being in urgent need of reform, Bosnia's agricultur­al sector has weathered the global pandemic better than others, and was among the few industries to record growth in exports in the first half of the year - albeit a meagre 2.5%. "During the coronaviru­s pandemic, the output has not decreased nor exports stopped," said Fatima Halilcevic, quality manager at Bosnaplod, Bosnia's biggest fruit processor which is based in the town of Brcko. "We even won a new market in Russia." Bosnaplod's clients include the likes of German food manufactur­ers Dr Oetker, Zott and Muller. Benjamin Vukotic, the director of the Zeraa Agricultur­e Investment Group which owns Bosnaplod, said group's revenues were up 30% in the first half of 2020 from the same period a year ago. The holdings of the group, founded by a subsidiary of the Investment Corporatio­n of Dubai ( ICD), include a vineyard in the southern Herzegovin­a region, which suffered heavy losses due to the pandemic. "We signed contracts with our subcontrac­tors during the period of the strictest ( COVID 19) lockdown without knowing what is going to happen," said Vukotic. "We could afford such risk because we have an investor willing to support us, but agricultur­e in Bosnia lacks systemic government support." The sector employs 18% of Bosnia's labour force and accounts for around 10% of its exports. But it is crying out for change, said Vjekoslav Vukovic, the head of Bosnia's Foreign Trade Chamber. "We have to modernise it, provide subsidies, harmonise regulation­s with EU standards and fight for foreign markets." Standing in his plum orchard at the foot of the Majevica mountain, fruit grower Nermin Kopcalic says all he cares about right now is the harvest. BRCKO: Oil prices edged lower on Friday but held near a five- month high as an easing of coronaviru­s lockdowns aids a slow recovery in fuel demand while major crude producers seek to limit supply. Brent crude LCOc1 futures were down 27 cents, or 0.1%, at $ 44.63 a barrel by 0850 GMT, heading for a 0.4% weekly decline. U. S. West Texas Intermedia­te ( WTI) crude CLc1 futures were down 33 cents, or 0.8%, at $ 42.49 but on track for a weekly gain of about 1.1%. The euro zone's economic recovery from its deepest downturn on record has stuttered this month as the pent- up demand unleashed by the easing of lockdowns in July has dwindled, a survey showed on Friday. In another sign of the sluggish nature of recovery, India's crude oil imports fell in July to their lowest since March 2010 amid renewed coronaviru­s lockdowns and refinery maintenanc­e. "An imminent return to higher crude demand ( in India) remains doubtful," Vienna- based consultanc­y JBC Energy said in a note. At the same time, the Organizati­on of the Petroleum Exporting Countries ( OPEC) and allies including Russia were focused on ensuring that members who had overproduc­ed against their commitment­s would reduce their output. Reuters reported that the OPEC+ group found that some members would need to cut output by 2.31 million barrels per day ( bpd) to offset their recent oversupply. Among OPEC members, Iraq and Nigeria were the least compliant and even the United Arab Emirates, which made additional voluntary cuts in June, overproduc­ed by about 50,000 bpd over the May- July period. The internal report also flagged demand risks, showing that OPEC+ expects oil demand in 2020 to fall by 9.1 million bpd, up 100,000 bpd from its previous forecast. If a prolonged second wave of infections hits China, India, Europe and the United States in the second half of the year, 2020 demand could fall by 11.2 million bpd, the report added. LONDON: The euro fell on Friday as an August batch of business surveys pointed to a stuttering economic recovery, while the U. S. dollar was on track to end what would be a ninth consecutiv­e weekly decline. Flash euro zone manufactur­ing and services purchasing managers index ( PMI) numbers for August were worse than expected. IHS Markit's flash Composite Purchasing Managers' Index, seen as a good gauge of economic health, sank to 51.6 from July's final reading of 54.9. The single currency, which had been falling before the results were released, extended losses and dropped as much as 0.6% to $ 1.1784 EUR= EBS, a one- week low. "The latest flash PMI data for August in France and Germany would appear to point to a plateauing in economic activity, particular­ly in the services sector, where rising infection rates here could well be tempering economic activity on the margins," said Michael Hewson, analyst at CMC Markets. The euro, which surged from under $ 1.12 in early July to a more than- two- year high of $ 1.1966 earlier this week, has been the biggest beneficiar­y from a dollar whacked recently by concerns about the United States' economic recovery and political squabbling over more stimulus. With its Friday rebound the dollar was on course to escape a ninth consecutiv­e weekly decline. Should the greenback end the week down, that would mark the longest losing streak since the summer of 2010 and a run that has only happened 5 times since 1990. Graphic: U. S. dollar index here A larger- than- expected rise in weekly jobless claims in the United States and warnings from Federal Reserve officials about a recovery in hiring have raised doubts about how quickly the world's largest economy will bounce back from the coronaviru­s. Those concerns, combined with an excess supply of dollars already in circulatio­n, are likely to weigh on the greenback in coming weeks, analysts say. Republican­s and Democrats are struggling to agree on additional stimulus to boost the economy, in contrast to the euro zone where investors have welcomed the scale of the economic packages recently launched. The dollar index, which measures the greenback against a basket of rivals, rose as the euro fell and was last at 93.216 = USD, up 0.5%. Commerzban­k currency analyst Ulrich Leuchtmann said that uncertaint­y about the dollar was underminin­g the greenback's safe- haven credential­s. "Everything all told: as long as the market considers the dollar to be excessivel­y high risk a sustainabl­e U. S. dollar recovery remains unlikely," he said. The standout performer earlier on Friday was China's yuan, which in offshore markets CNH= EBS briefly hit 6.8935, its strongest since Jan. 21. LONDON: Gold up over unexpected rise in US initial jobless claims Dollar weakens amid recovery concerns, more losses seen likely USD could weaken by as much as 20- 25% over the coming two years, aiming "for ( at least) > 1.25 levels in EUR/ USD." Elsewhere, GBP/ USD traded 0.2% higher at 1.3240, helped retail sales rising above their pre- coronaviru­s level in July, as shops selling non- essential goods opened again after the lockdown in March. Retail sales volumes rose by a much stronger than expected 3.6% from June and were 1.4% higher than in July 2019, the Office for National Statistics said, representi­ng a sharp recovery from double- digit falls in April and May. Additional­ly, USD/ CNY dropped 0.1% to 6.9071, after earlier falling below 6.90 for the first time since January. The Chinese currency has responded favorably to the idea that the trade agreement between China and the U. S. could well stay intact despite a recent escalation of tensions, as Beijing confirmed the two countries plan to hold talks soon and White House economic advisor Lawrence Kudlow said he expected China to make major purchases of U. S. oil and other exports soon. The dollar weakened in early European trade Friday, amid doubts about the pace with which the U. S. economy will rebound from the coronaviru­s- inspired slowdown. At 2: 55 AM ET ( 0655 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, was down 0.1% at 92.662. USD/ JPY was down 0.2% at 105.57, while EUR/ USD was up 0.1% at 1.1868. Dragging the greenback lower was the news Thursday that applicatio­ns for U. S. unemployme­nt benefits increased, defying consensus forecasts for a further decline, while the Philadelph­ia Fed reported a disappoint­ing reading for its manufactur­ing index. This came a day after the Federal Reserve warned that the path to U. S. economic recovery from the Covid- 19 outbreak remained highly uncertain, with the recovery in hiring starting to slow. "A widening budget deficit paired with a continued trade deficit is an issue for the USD," said analyst Andreas Steno Larsen at Nordea, in a research note, "but mostly when NEW YORK: Gold was up on Friday morning in Asia, building on its gains from the previous session after a surprising uptick in the number of U. S. initial jobless claims saw investors turn to the safehaven yellow metal. A total of 1.106 million Americans claimed unemployme­nt benefits during the previous week according to data released on Thursday. Surpassing the one million- mark, the number of claims also surpassed the forecasted 925,000 claims prepared by Investing. com as well as last Thursday's 971,000 figure. Gold futures were up 0.39% at $ 1,954.10 by 12: 49 AM ET ( 5: 49 AM GMT). After Wednesday's release of the minutes from the U. S. Federal Reserve's pol- icy meeting disappoint­ed with their lack of guidance, investors will be looking to Fed Chairman Jerome Powell's speech at the Jackson Hole symposium, to take place from August 27- 28, which will touch on the Fed's Monetary Policy Framework Review, according to a Fed statement on Thursday. Investors are also keeping an eye on the U. S.- China relationsh­ip, with the two countries working to reschedule talks to discuss trade and other matters. Originally scheduled to take place on August 15, the two sides will be in close contact in the near term for the new date, according to Commerce Ministry spokesman Gao Feng. But Gao did not announce an exact date, nor provide further details. LONDON: the rest of the world catches up growth- wise, as has been the case since the reopening of the global economy during Q2." The euro has been the biggest beneficiar­y of a recent decline in the dollar, but this tone could be tested with the release of eurozone manufactur­ing data later in the session. That said, "the EUR has much further to go when/ if the market realizes that the tail risks in the EUR are much smaller now compared to 912 months ago," Larsen said, adding that the Daily opening & closing rates Metals, Energy, COTS/ FX and US Indices On Tuesday at Pakistan Mercantile Exchange Limited, PMEX Commodity Index closed at 5,067. The traded value of Metals, Energy, COTS/ FX and Indices was recorded at PKR 16.685 billion and the number of lots traded was 16,552. Major business was contribute­d by Gold amounting to PKR 12.772 billion, followed by Silver ( PKR 1.513 billion), Currencies through COTS ( PKR 626.210 mill i on), Platinum ( PKR 423.909 million), Copper ( PKR 408.660 million), NSDQ 100 ( PKR 396.605 million), DJ ( PKR 279.909 million), Natural Gas ( PKR 131.787 million), Crude Oil ( PKR 110.857 million) and SP500 ( PKR 21.031 million). In agricultur­e commoditie­s, 4 lots of Wheat amounting to PKR 2.120 million were traded. PMEX Index 5,067 Total Volume ( Lots): 16,552 Traded Value ( Rs): 16,685,463,298 Commodity Price Quotation Open Close Commodity Price Quotation Open Close GOLDEURJPY ( COTS) GOLDGBPJPY ( COTS) GOLDCHFJPY ( COTS) GOLDAUDJPY ( COTS) GOLDEURCAD ( COTS) GOLDEURAUD ( COTS) GOLDEURCHF ( COTS) GOLDGBPCHF ( COTS) GOLDAUDCAD ( COTS) DJ NSDQ100 SP500 JPYEQTY ICOTTON ICORN IWHEAT ISOYBEAN JPY ¥ 125.859 125.802 WTI CRUDE OIL BRENT CRUDE OIL NATURAL GAS SILVER GOLD GOLD MTOLAGOLD TOLAGOLD PLATINUM COPPER PALLADIUM GOLDEURUSD ( COTS) GOLDGBPUSD ( COTS) GOLDUSDJPY ( COTS) GOLDAUDUSD ( COTS) GOLDUSDCAD ( COTS) GOLDUSDCHF ( COTS) GOLDEURGBP ( COTS) $ Per Barrel 42.84 42.52 JPY ¥ 138.920 139.587 $ Per Barrel 45.35 45.03 JPY ¥ 116.952 116.709 US $ Per mmbtu 2.343 2.411 JPY ¥ 76.504 76.353 $ Per Ounce 27.618 27.770 CAD$ 1.5678 1.5714 $ Per Ounce 1,993.4 2,010.5 AUD$ 1.6452 1.6476 Rs Per 10 gms 107,190 108,328 CHF 1.0762 1.0769 Rs Per Tola 118,682 121,789 CHF 1.1878 1.1960 Rs Per Tola 118,682 121,789 CAD$ 0.9532 0.9538 $ Per Ounce 969.3 975.4 Index Value 27776 27723 US $ per pound 2.909 2.971 Index Value 11,288.00 11,412.75 $ Per Ounce 2,227.8 2,225.1 Index Value 3380.25 3387.25 US$ 1.1874 1.1935 Index Value 23160 23060 US$ 1.3107 1.3243 US Cents per pound 63.41 62.88 JPY ¥ 105.997 105.400 US Cents per bushel 343 341.00 US$ 0.7218 0.7244 US Cents per bushel 515.25 506.25 CAD$ 1.3204 1.3167 US Cents per bushel 914 912.25 CHF 0.9063 0.9032 GBP 0.9060 0.9013 PRINTED AND DISTRIBUTE­D BY PRESSREADE­R PressReade­r. com + 1 604 278 4604 O R I G I N A L C O P Y . 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