· The dollar and U.S. government debt yields fell on Thursday while equity markets rallied after a modest rise in consumer prices in April eased concerns the Federal Reserve might raise interest rates more than expected this year.
The dollar fell against the euro, the Japanese yen and a basket of other major currencies, while the Mexican peso and Brazilian real jumped more than 1 percent on the news.
The dollar index, which tracks the greenback against a basket of currencies, last stood at 92.650 after touching as high as 93.42 earlier this week.
The euro benefited the most on the dollar’s pullback, posting a 0.6 percent gain at $1.1920, while the dollar slipped 0.3 percent to 109.37 yen.
· Equity markets rose as the soft inflation data reduced the prospect of the Fed boosting rates three more times in 2018, instead of four times many in the market were forecasting.
· Benchmark 10-year U.S. Treasury notes rose 8/32 in price to push yields down to 2.964 percent after breaching 3 percent on Wednesday.
· The U.S. Labor Department said its Consumer Price Index rose 0.2 percent last month, less than forecasts for 0.3 percent, as a moderation in healthcare prices offset increases in the cost of gasoline and rental accommodations. [L1N1SG1UT]
· The pound fell sharply on Thursday to a fresh four-month low against the dollar after the Bank of England held rates steady as expected but cut its growth and inflation projections for this year and next.
Before the BoE rate announcement, sterling was up as much as 0.4 percent at $1.3618. But afterwards it fell to trade 0.2 percent lower on the day at $1.3521, and then extended to those falls to a four-month low of $1.3474.
· The BOE governor spoke after officials kept the key interest rate at 0.5 percent, citing the first-quarter slump, and said inflation will weaken faster than previously thought. While his comments keep the prospect of tighter policy alive, investors sold the pound and reduced their bets on a hike this year.
The BOE said it expected the U.K. economy to grow by 1.4 percent in 2018, downgrading its previous projection of 1.8 percent, slightly above what most economists thought was likely at the time.
Money markets now show the probability of an August increase in borrowing costs as only about 50 percent, and a hike by the end of the year -- previously fully priced in -- at about 87 percent.
· President Donald Trump said he will meet North Korean leader Kim Jong Un on June 12 in Singapore, locking in a historic summit between the two leaders amid their confrontation over Pyongyang’s nuclear weapons program.
U.S. President Donald Trump said on Thursday he had high hopes of “doing something very meaningful” to curtail North Korea’s nuclear ambitions at a summit in Singapore next month, after Pyongyang smoothed the way for talks by freeing three American prisoners.
· Having returned from North Korea on Thursday, Secretary of State Mike Pompeo will begin talks in coming days to persuade allies in Europe, the Middle East and Asia to press Iran to return to negotiations over its nuclear and missile programs, U.S. officials said.
· The U.S. hope is that Iran will be dragged to the table by the resumption of U.S. sanctions - and possibly the imposition of more - which would penalise European and other companies and likely cripple Iran’s oil-driven economy.
· Israel said it attacked nearly all of Iran’s military infrastructure in Syria on Thursday after Iranian forces fired rockets at Israeli-held territory for the first time in the most extensive military exchange ever between the two adversaries.
· Iran's bold rocket assault on Israeli forces Thursday signals an unwillingness to just take a diplomatic approach to the U.S. exit from the nuclear agreement, and it's likely to do everything it can to get around sanctions.
"This is a real escalation. This is significant and the retaliation by Israel was not small potatoes," said John Kilduff of Again Capital. "It feels like we're on the brink of war. I think Rouhani has lost the support of the supreme leader and the IRGC is back in ascendancy."
· U.S. Senator Marco Rubio announced legislation on Thursday that would bar the sale of “sensitive” technology to China and hike some duties and taxes, in the latest move by U.S. lawmakers to clamp down on what they regard as Beijing’s efforts to steal U.S. intellectual property.
· U.S. Homeland Security Secretary Kirstjen Nielsen told colleagues she was close to resigning after being criticized by President Donald Trump during a Cabinet meeting on Wednesday, the New York Times reported on Thursday, citing several current and former officials familiar with the incident.
During the meeting, Trump blamed Nielsen for what he said was her failure to secure U.S. borders, the newspaper cited the officials as saying.
· Mario Draghi speaks Friday, 13:15. The President of the European Central Bank will be speaking in Florence, Italy, his home country. In his last press conference in late April, Draghi recently described the Q1slowdown as a moderation that is due to temporary factors. Since making that speech we learned that growth was indeed weaker and also inflation decelerated. Will he express more concern about the situation or does he still see it as temporary? Any reference to the economy and inflation will be watched closely and set to move markets.
· Crude prices ended the session slightly higher on Thursday as investors weighed the potential disruption to oil flows from major exporter Iran in the face of U.S. sanctions.
The market also contended with concerns about Venezuela’s crude production slipping further and with bullish drawdowns in U.S. crude inventories.
Brent crude futures settled 26 cents, or 0.3 percent, higher at $77.47 a barrel, after earlier hitting $78, the highest since November 2014. U.S. West Texas Intermediate settled up 22 cents at $71.36.
· An expansion of oil drilling in the eastern Gulf of Mexico would interfere with U.S. military testing unless the Pentagon and another agency develop rules to govern the work, the U.S. Department of Defense said in a report this week.
· “Military flexibility in the region would be lost and test and training activities would be severely affected,” without mutually agreed restrictions between the Pentagon and the Interior Department on the drilling, said the report, a copy of which was seen by Reuters.
· A stunning win by the opposition bloc in Malaysia's general election on Wednesday could have implications for the Southeast Asian nation's ties with China, a major investor.
Mahathir Mohamad, a former Malaysian prime minister who led his opposition alliance to victory over the ruling coalition, said Thursday the country could renegotiate several agreements that had been struck with China.
Mahathir said he had no problem with China's Belt and Road Initiative (BRI), a wide-reaching infrastructure investment program, but added that "we would not like to see too many warships in this area, because [a] warship attracts other warships," Reuters said on Thursday.
Reference: Reuters, CNBC, Bloomberg, Forexcrunch
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