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Daily Agenda: No Consensus on Dollar’s Fate As Year Ends

US third-quarter GDP slightly weaker than estimated; West Texas Intermediate crude briefly trades at a premium to Brent.

As the country heads into the Christmas and New Year’s holiday stretch, economists and strategists are focusing on the state of the U.S. economy, working to formulate the dollar’s possible trajectory in 2016. The U.S. Commerce Department’s final third-quarter U.S. GDP reading, released yesterday, came in at an annualized 2 percent — better than the consensus forecast of 1.9 percent — but weaker than the prior revision. Personal consumption, at a robust 3 percent annual gain, was a primary driver of the relative strength. Separate data from the Commerce Department revealed that consumer spending climbed sharply in November by 0.3 percent versus the prior month. With the euro-dollar rate contracting from nearly 1.08 to more than 1.09 in recent sessions the division, among pundits calling for parity versus a much wider spread is now nearly even.

OPEC forecasts higher prices, lower production. In its annual World Outlook Report released today, the Organization of Petroleum Exporting Countries forecasts a rebound in crude oil prices to an average of $70 per barrel by 2020. Critically, the report assumes a reduction of OPEC production levels of more than 1 million a day by 2019. Separately, U.S. grade West Texas Intermediate crude futures for January delivery traded at a premium to Brent indexed contracts in Europe briefly overnight, a rare occurrence.

Brazil declares health crisis. The Health Ministry of Brazil yesterday declared emergency measures to combat an outbreak of Zika virus. Zika is a pathogen transmitted by mosquitos that has been linked to a sudden increase in birth defects in the country.

U.S. threatens steel tariffs. Yesterday the Commerce Department released a preliminary report that outlined concerns that international steel manufacturers have sold at below market rates intentionally, a practice known as “dumping.” Chinese producers in particular were singled out for abusive practices. Commerce found sales at distorted prices by Chinese firms may be subject to a tax of as much as 256 percent. The news did not shock basic materials markets. Philip Gibbs, metal equity research analyst at KeyBanc Capital Markets in Cleveland, wrote in a note to investors, “It appears trade cases will not be game-changing for domestic steel producers, consistent with our long-held view that China would be made the trade case scapegoat.”

U.K. and France post weak GDP data. The U.K. National Statistics Office today released final third-quarter GDP data. Growth slipped to 2.1 percent year-over-year versus an anticipated 2.3 percent, according to consensus forecasts. The situation looks even foggier across the English Channel, with French GDP for the three-month period registering at merely 1.1 percent versus the same quarter in 2014.

Greece gets a cash infusion. Yesterday the European Stability Mechanism membership and other creditors agreed to advance €1 billion ($1.09 billion) to the Greek government as a final tranche in economic aid to the Mediterranean nation for 2015. The ESM-led consortium, which includes the International Monetary Fund, has yet to discuss debt restructuring that most economists believe will be necessary for Greece to meet its obligations.

Airbus gets order from China. China Southern Airlines Co., the largest Asian airline by number of planes in operation, announced yesterday a definitive deal to acquire 10 Airbus Group SE jets. The purchase follows the contract the carrier announced last week for more than 100 planes from Boeing.

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