Stock Markets
Analysis-Euro’s stellar run in doubt as ECB muddies rate outlook
© Reuters. FILE PHOTO: Euro banknotes are seen in this illustration taken July 17, 2022. REUTERS/Dado Ruvic/Illustration/File Photo
By Naomi Rovnick and Dhara Ranasinghe
LONDON (Reuters) – Euro bulls are set for an anxious summer ahead as doubts creep in over how far the ostensibly still-hawkish European Central Bank will go with interest rate rises.
The euro has been on a stellar run, up roughly 3.5% against the dollar so far this year to just under $1.11. Measured against the currencies of the euro zone’s main trading partners, it is not far off this month’s record highs.
Investors are strongly positioned for the euro – which languished at two-decade lows against the greenback this time last year – to keep rising.
That view is primarily based on the belief that the U.S. Federal Reserve will end its most energetic rate rise cycle in 40 years before the ECB turns dovish.
Under the surface, investors and economists say, even the most hawkish ECB members will be looking for the end of tightening as inflation softens and economic activity weakens.
“I don’t have a high conviction on the euro,” said Gabriele Foa, co-portfolio manager at Algebris Investments, who said he had been bullish on the single currency at the start of 2023 while now maintaining a mild “long bias”.
The ECB, he added, would “keep the inflation-fighting mask on” for a few more months, while at the same time weak data would be “feeding into (ECB) communication and eventually policy”.
On Thursday, the ECB delivered a widely anticipated 25 basis points rate increase to a 23-year high of 3.75% and said inflation remained too high.
ECB President Christine Lagarde responded to most of the questions at a press conference by saying all options remained on the table to “break the back” of inflation, but sent the euro tumbling with a dovish flourish near the end.
“Do we have more ground to cover? At this point in time I wouldn’t say so,” Lagarde said, almost unprompted, stressing that the ECB’s decisions would depend on incoming data.
The euro fell 0.9% against the dollar, with stubborn inflation and a growing risk of a recession pulling policymakers in opposing directions.
The Federal Reserve on Wednesday also hiked interest rates but markets suspect that was its last tightening move. In contrast, money markets now price in a 40% chance of another quarter point ECB move in September.
BOUNCE BACK
A hawkish ECB, just as cooling U.S. inflation points to peak Fed rates, helps explain the euro’s recent rally. The currency is up roughly 10% from lows hit last year below the psychologically key $1-mark.
A trade-weighted index, that measures the euro’s value against a basket of other currencies and is followed closely by the ECB, is trading near record highs.
That is partly because of weakness in the yuan, which accounts for over 10% of the basket, and has been hurt by a lacklustre Chinese economy.
Speculators had the biggest net long position in the euro in nine weeks in the week ended July 18, CFTC data showed.
The path ahead was expected to be foggy over the summer as the market awaits new ECB inflation projections in September, fresh data, and assesses the Fed outlook. July euro zone inflation numbers are out next week.
“I’m a little sceptical of markets thinking that they (ECB policymakers) will twist at this point into a more dovish position,” said Francesco Sandrini, head of multi-asset strategies at Amundi, Europe’s largest asset manager.
“This is going to happen but only when inflation peaks … we’ll probably embark on a reversal like we are seeing already underway in the U.S., but that’s not a moment yet.”
Sandrini said Amundi expected the euro to rise to $1.15- $1.20 in the coming quarters, implying a further gain of at least 4% from current levels.
Further euro gains were not expected to unsettle policymakers since this would help keep the costs of imports – and overall inflation – down.
“Currency strength is welcome to battle inflation, it’s why the SNB for example does not mind about the franc,” said Societe General currency strategist Kenneth Broux. He was referring to the Swiss National Bank and a Swiss franc up over 7% against the dollar so far in 2023.
But with the jury very much out on whether the ECB will move again in September, the currency could as easily head down as back up, analysts said.
Monex Europe head of FX analysis Simon Harvey reckons, “the data will push back against the idea they can hike again in September”.
Euro zone business showed shrank much more than expected in July as demand in the bloc’s dominant services industry declined, data this week showed.
A euro level of $1.10, Harvey said, seemed fair.
Some were bearish.
Robin Brooks, chief economist at the Institute for International Finance in Washington, said a war in Ukraine that had left energy prices highly elevated pointed to a big terms of shock trade that should pull the euro back down.
“I don’t think the rally back from parity should have happened,” Brooks said.
Stock Markets
Gaza population down by 6% since start of war – Palestinian statistics bureau
JERUSALEM (Reuters) – The population of Gaza has fallen 6% since the war with Israel began nearly 15 months ago as about 100,000 Palestinians left the enclave while more than 55,000 are presumed dead, according to the Palestinian Central Bureau of Statistics (PCBS).
Around 45,500 Palestinians, more than half of them women and children, have been killed since the war began but another 11,000 are missing, the bureau said, citing numbers from the Palestinian Health Ministry.
As such, the population of Gaza has declined by about 160,000 during the course of the war to 2.1 million, with more than a million or 47% of the total children under the age of 18, the PCBS said.
It added that Israel has “raged a brutal aggression against Gaza targeting all kinds of life there; humans, buildings and vital infrastructure… entire families were erased from the civil register. There are catastrophic human and material losses.”
Israel’s foreign ministry said the PCBS data was “fabricated, inflated, and manipulated in order to vilify Israel”.
Israel has faced accusations of genocide in Gaza because of the scale of death and destruction.
The International Court of Justice (ICJ), the United Nations’ highest legal body, ruled last January that Israel must prevent acts of genocide against Palestinians, while Pope Francis has suggested the global community should study whether Israel’s Gaza campaign constitutes genocide.
Israel has repeatedly rejected accusations of genocide, saying it abides by international law and has a right to defend itself after the Hamas attack on Oct. 7, 2023 killed 1,200 Israelis and precipitated the current war.
The PCBS said some 22% of Gaza’s population currently faces catastrophic levels of acute food insecurity, according to the criteria of the Integrated Food Security Phase Classification, a global monitor.
Included in that 22% are some 3,500 children at risk of death due to malnutrition and lack of food, the bureau said.
Stock Markets
Venezuela economy grew over 9% in 2024, president says
CARACAS (Reuters) -Venezuela’s economy grew over 9% in 2024, President Nicolas Maduro said, according to a transcript of an interview published by Mexican media outlet La Jornada on Wednesday.
“In 2023, we had 5.5% (growth). In 2024, according to all scientific, statistical, and technical data, we will surpass 9% growth in gross domestic product, with a very high level of growth in the real economy, as well as in the hydrocarbons sector,” Maduro told Spanish journalist Ignacio Ramonet.
Venezuela’s economy in recent years has experienced a prolonged crisis marked by triple-digit inflation and the exodus of millions of Venezuelans seeking better opportunities elsewhere.
In 2019, the government loosened controls on the private sector, allowing for an informal dollarization, which provided a lifeline to key sectors of the economy.
However, analysts believe the strategy has not been sufficient for a full economic recovery.
The interview with Maduro is set to air on Venezuelan state television on Wednesday evening.
Stock Markets
Driver kills 10 ramming truck into New Orleans crowd in New Year’s Day attack
By Brian Thevenot
NEW ORLEANS (Reuters) -A driver crashed his pickup truck into a crowd celebrating New Year’s Day in New Orleans’ French Quarter and opened fire, killing 10 people and injuring more than 35, in an early morning attack the FBI said was a potential act of terrorism.
The suspect, described by one city leader as being in “full military gear,” died after a shootout with police, law enforcement officials said.
“This man was trying to run over as many people as he could,” Police Chief Anne Kirkpatrick said at a televised press conference on Wednesday. “He was hell-bent on creating the carnage and the damage that he did.”
The incident occurred at 3:15 a.m. (0915 GMT) at the intersection of Canal and Bourbon Streets, a historic tourist destination in the city’s French Quarter known for attracting large crowds with its music and bars.
Kirkpatrick said the driver, who swerved around barricades, fired at police and struck two police officers from the vehicle after it crashed. The officers were in stable condition, she added.
“We know the perpetrator has been killed,” said New Orleans City Councilman Oliver Thomas. “As we search for a motive, remember there is no making sense of evil.”
Officials did not immediately name the suspect.
NBC News, citing three unnamed senior law enforcement sources, identified the suspect as Shamsud Din Jabbar, 42.
NOLA.com, citing one unidentified law enforcement source, reported that same suspect was carrying an ISIS flag in the truck. Reuters was unable to verify the reports and the U.S. Army did not immediately respond to a request for comment.
More than 300 officers were on duty at the time of the incident, police said. The city hosts the Sugar Bowl, a classic American college football game, each New Year’s Day, and will also be the site of the NFL Super Bowl on Feb. 9.
New Orleans Mayor LaToya Cantrell called the incident a terrorist attack.
The FBI said in a statement that it was investigating the incident as an act of terrorism. Initially, Alethea Duncan, an assistant special agent in charge of the FBI’s New Orleans field office, had said it was not a terrorist event.
Duncan said a suspected improvised explosive device was found but provided no further details.
“From what I understand, there is a potential that other suspects could be involved in this, and all hands on deck on determining who these individuals are and finding them,” New Orleans City Council President Helena Moreno told 4WWLTV.
“Information that I received is that this individual was in full military gear, that he is apparently not local, and that he was prepared, and that he was very prepared to inflict horrific pain on the people on Bourbon Street,” Moreno said.
‘HORRIFIC ACT’
Verified video taken by an onlooker shows at least two twisted bodies in the street, with one of them lying in what appears to be a puddle of blood. A bystander is seen kneeling over one of the bodies as a group of uniformed military personnel in green uniforms and carrying firearms runs past.
The injured were taken to at least five hospitals, according to NOLA Ready, the city’s emergency preparedness department.
A couple told CBS News that they heard crashing noises coming from down the street and then saw a white truck slam through a barricade “at a high rate of speed”.
Zion Parsons (NYSE:), 18, told NOLA.com that he and his two friends were leaving a Bourbon Street eatery when they heard a commotion and saw a white car barreling toward them.
He said he dodged the vehicle, but one of his friends was struck, with her leg “twisted and contorted above and around her back.”
“You can just look and see bodies, just bodies of people, just bleeding, broken bones,” he said.
Louisiana U.S. Senator Bill Cassidy said on CNN that despite the attack, law enforcement in New Orleans was ready for the Sugar Bowl on Wednesday night. “The Superdome has been locked down,” he said.
In response to vehicle attacks on pedestrian malls around the world, New Orleans was in the process of removing and replacing the steel barriers known as bollards that restrict vehicle traffic in the Bourbon Street pedestrian zone. The project’s status was unclear at the time of Wednesday’s attack.
Construction began in November 2024 and was scheduled to continue through February 2025, according to a city website.
Last month in Germany, a 50-year-old man was charged with multiple counts of murder and attempted murder after police said he plowed a car through crowds at a Christmas market in Magdeburg, killing five people and injuring scores.
President Joe Biden called the city’s mayor to offer full federal support. President-elect Donald Trump said his incoming administration would help New Orleans as it investigates and recovers from what he called an act of pure evil.
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