• The greenback on Thursday strengthened against the Canadian dollar and the Mexican peso following news the United States will impose tariffs on aluminium and steel imports from both neighbouring countries, as well as from the European Union.
The announcement ends months of uncertainty about potential exemptions and reignited fears of a global trade war.
The rise of a potentially eurosceptic government in Italy and the impact that could have on the stability of Europe had driven the euro to 10-month lows against the dollar on Tuesday.
The euro strengthened against the dollar on Thursday, climbing half a percent to a three-day high of $1.1724, after having risen 1.1 percent the previous day, its second-biggest daily gain this year.
The dollar shed 0.5 percent to 108.37 yen, edging back toward Tuesday’s five-week low of 108.10 yen.
The dollar index, which measures the greenback against a basket of six major currencies, was down 0.4 percent to a session low of 93.717.
• Italy’s political woes pose a threat to synchronized global growth and stand out as a risk worth watching as the Federal Reserve continues to gradually raise U.S. rates in the face of big government stimulus at home, one of the most influential Fed policymakers said on Thursday.
The rise in oil prices has a balanced effect on the U.S. economy, pinching consumers but boosting the energy sector, Federal Reserve Governor Lael Brainard said on Thursday.
• U.S. consumer spending posted its biggest gain in five months in April, a further sign that economic growth was regaining momentum early in the second quarter, while inflation continued to rise steadily.
Other data on Thursday showed a bigger-than-expected drop in the number of Americans filing applications for unemployment benefits last week. Moderately rising inflation and a tightening labor market bolstered expectations that the Federal Reserve will raise interest rates next month.
• On Thursday, U.S. Commerce Secretary Wilbur Ross said a 25 percent tariff on steel imports and a 10 percent levy on aluminum imports from its allies would go into effect on Friday.
Mexico responded by imposing measures on U.S. farm and industrial products, targeting pork legs, apples, grapes and cheeses, as well as steel.
Canada said it would impose retaliatory tariffs on $12.8 billion worth of U.S. exports and challenge the steel and aluminum tariffs under the North American Free Trade Agreement and the World Trade Organization.
• The Trump administration's decision to slap tariffs on Canada and Mexico makes it less likely there will be a new NAFTA deal in the near term and sends a modestly negative signal on U.S. trade policy, according to Goldman Sachs economists.
"The decision to impose tariffs on Canada and Mexico suggests that prospects for a NAFTA agreement in the near-term are fading," the Goldman economists wrote. "The Administration's negotiating stance is often unpredictable so there is a risk of over-interpreting any single event. That said, this represents another signal that prospects for a near-term NAFTA deal are fading, just a few weeks after it had appeared fairly likely that a "skinny" agreement involving the auto sector might be reached."
• U.S. Secretary of State Mike Pompeo said on Thursday he was confident talks with North Korean officials were moving in the right direction toward a summit and that a North Korean envoy will travel to Washington to deliver a personal letter from leader Kim Jong Un to President Donald Trump.
• U.S. President Donald Trump on Thursday played down the chances of a quick deal in getting North Korea to abandon its nuclear arms as a delegation from Pyongyang headed to meet him with a letter from North Korean leader Kim Jong Un, suggesting a proposed summit may be back on.
Trump told Reuters he was still hoping for an unprecedented meeting with Kim on June 12 in Singapore to push for North Korean “denuclearization,” but North Korea’s leader said his position on that central issue had not changed.
“I’d like to see it done in one meeting,” Trump said in an interview on Air Force One. “But often times that’s not the way deals work. There’s a very good chance that it won’t be done in one meeting or two meetings or three meetings. But it’ll get done at some point.”
• The remaining parties to the Iran nuclear deal have warned the United States that its decision to withdraw from the pact jeopardizes Russian and Chinese efforts to limit Iran’s ability to develop atomic weapons, Western diplomats told Reuters.
• Italy’s League party and 5-Star Movement have agreed to form a coalition government in which the little-known economics professor Giovanni Tria will take over the pivotal economy ministry job, sources from the two parties said on Thursday.
President Sergio Mattarella torpedoed an initial attempt by the League and 5-Star to form a coalition, rejecting their previous candidate for the economy portfolio, 81-year-old economist Paolo Savona, who has spoken out against the euro single currency.
• U.S. oil fell nearly 2 percent on Thursday, despite a larger-than-expected decline in U.S. crude inventories, while global benchmark Brent was little changed, pushing the spread between the two to its widest in more than three years.
U.S. crude stockpiles fell 3.6 million barrels last week, the Energy Information Administration said, exceeding expectations for a decline of 525,000 barrels. Gasoline and diesel stocks rose, but the crude drawdown was a salve for recent losses in U.S. futures.
Brent crude futures for August ended down 14 cents to $77.56 a barrel, while U.S. West Texas Intermediate July crude settled $1.17, or 1.7 percent, lower at $67.04 a barrel.
Reference: Reuters, CNBC
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