On the foreign exchange market, the dollar index (which measures its value against a basket of six reference currencies) has regained ground after 3 sessions of decline. The index finished up 0.26% to 95.92 points. The euro dropped 0.29% to $ 1.1441 while German industrial output fell sharply in November (-1.9% over one month). In the bond markets, interest rates started rising again on Tuesday as the 10-year T-Bond yield returned 3 basis points to 2.73%.
Oil continued its rally after suffering a 40% drop in the fourth quarter of 2018. The February futures contract on the WTI gained 2.60% on Tuesday, at $49.78 while the maturity March on Brent picked up 2.42% to $58.72. Since the beginning of 2019, WTI has regained nearly 9%, and it has rebounded 16.5% from its lowest level on December 24, at $42.36. Oil prices are supported by signs that OPEC has begun to reduce production as early as December, anticipating the implementation of the agreement with other producing countries, including Russia, to reduce by 1.2 million barrels per day from January.
On the trade front, the U.S.-China negotiations started Monday in Beijing and will continue on Wednesday for a third day, said a member of the US delegation. Donald Trump once again assured, on Tuesday, on his Twitter account that the “discussions with China are going very well!” In addition, the US President has read a tweet welcoming the “REALLY good economic indicators” of the United States despite the rapid normalization of interest rates led by the Fed.
Finally, Donald Trump was expected to make announcements concerning the border wall with Mexico at 9 pm in Washington. Faced with the refusal of congressional Democrats to grant him $5.7 billion to finance the wall, the US president could change his strategy.
The wall with Mexico could be built by the army!
Instead of linking the financing of the wall to the adoption of the US budget (currently blocked by the “shutdown” since December 22), he could use his presidential powers to tap into the budget of the Defense.
