• The dollar fell on Wednesday from its strongest levels in 2018 against a basket of currencies due to mild profit-taking, but is expected to resume its rise on solid U.S. economic growth and more interest rate increases anticipated from the Federal Reserve.
The index that tracks the dollar against six currencies .DXY slipped 0.1 percent to 93.028 after touching a 2018 peak of 93.416 earlier.
The three-week long rally for the U.S. currency, in which it has reversed several months of weakness, has caused the unwinding of popular long bets on emerging market and G10 currencies.
The euro hit a year-to-date low of 1.1821 earlier on Wednesday before paring gains to $1.1875, for a 0.1 percent rise on the day, according to Reuters data.
The dollar climbed 0.5 percent to 109.68 yen JPY= and edged up 0.3 percent to 1.0044 Swiss franc CHF= on fading worries about U.S. President Donald Trump's decision to pull the United States out of the Iran nuclear deal.
• Expectations that the Federal Reserve will raise interest rates at least two more times this year and surging Treasury issuance as the U.S. government finances worsening trade and budget deficits has roiled bonds and sent 10-year yields to their highest levels in more than four years.
Those yields broke back above 3 percent on Wednesday and are likely to increase further to at least the 3.50 percent level. If the Fed adopts a more aggressive view of the economy, yields would rise even further.
• U.S. producer prices barely rose in April after strong gains in the first quarter, held back by a moderation in the cost of services such as hotel accommodation and healthcare, which could ease fears that inflation pressures were rapidly building up.
The Labor Department said on Wednesday its producer price index for final demand edged up 0.1 percent last month after increasing 0.3 percent in March. That lowered the year-on-year increase in the PPI to 2.6 percent from 3.0 percent in March.
The slowdown in wholesale price growth reported by the Labor Department on Wednesday is, however, likely temporary as manufacturers have been reporting paying more for raw materials. Economists also expect oil prices to surge after President Donald Trump on Tuesday pulled the United States out of an international nuclear deal with Iran.
• North Korea released three American prisoners and handed them over to U.S. Secretary of State Mike Pompeo on Wednesday, clearing a major obstacle to an unprecedented summit between President Donald Trump and North Korean leader Kim Jong Un.
• U.S. President Donald Trump said on Wednesday he will announce the site for a summit with North Korean leader Kim Jong Un within three days and it will not be held at the demilitarized zone along the border between the two Koreas.
• U.S. VICE PRESIDENT PENCE SAYS U.S. WILL NOT LET OFF THE PRESSURE ON NORTH KOREA UNTIL FULL DENUCLEARIZATION ACHIEVED –STATEMENT
• European policymakers are trying to keep the Iran nuclear deal alive, with renewed contacts with both Tehran and Washington.
Europeans disapproved of Trump's decision to leave the agreement, announced Tuesday, and to re-impose sanctions on Iran. The matter seems so urgent for European leaders that European Council President Donald Tusk has added the Iran deal to the items under discussion next week at an EU summit in Sofia, Bulgaria.
At the same time, the European Commission is also in contact with its external partners, as well as studying the U.S. measures, including the new sanctions, to understand their impact.
• President Donald Trump's move to withdraw the United States from the Iran nuclear deal and restore sanctions on Tehran threatens to reopen a long-dormant dispute with Europe and inflame trade tensions with the Continent, analysts and sanctions experts warn.
History is not on Trump's side. The last time America and Europe went head-to-head over Iranian sanctions, Europe pushed back and the United States was forced to back down.
• Russia is unlikely to try to limit Israel’s military actions in Syria, Israeli Prime Minister Benjamin Netanyahu said on Wednesday after meeting Russian President Vladimir Putin.
Since intervening in the Syrian civil war on behalf of President Bashar al-Assad in 2015, Russia has generally turned a blind eye to Israeli attacks on suspected arms transfers and deployments by Assad’s Iranian and Lebanese Hezbollah allies.
But Moscow’s condemnation of an April 9 strike that killed seven Iranian personnel set off speculation in Israel that Russian patience might be wearing thin.
• Bank of England interest rates looks set to stay on hold on Thursday, after unexpectedly weak economic data and cautious remarks from Governor Mark Carney dashed the chances of what until a few weeks ago looked like a near-certain increase.
Now investors want to see if Carney tries to keep market expectations of an August rate hike alive when he gives a news conference shortly after the 1100 GMT (7.00a.m. ET) rate announcement, or if he decides that hedging his bets is a safer strategy.
• Oil prices rose about 3 percent on Wednesday and hit fresh 3-1/2 year highs after a bigger-than-expected drawdown in U.S. oil inventories extended gains from the United States’ decision to quit a nuclear deal with Iran.
Brent crude futures rose $2.36, or 3.2 percent, to settle at $77.21 a barrel. The global benchmark hit a session high of $77.43, the highest since November 2014. U.S. West Texas Intermediate (WTI) crude futures rose $2.08 to settle at $71.14 a barrel, a 3-percent gain.
Both contracts notched their biggest daily percentage gain in a month.
Reference: Reuters, CNBC, MKS News
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