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·         The dollar was elevated on Monday after the release of an upbeat U.S. jobs report, although uncertainty over potential political risks kept the currency’s near-term outlook murky.

The dollar index against a basket of six major currencies stood steady at 94.171 after gaining about 0.2 percent on Friday.

Closely watched data out on Friday showed U.S. jobs growth gathering pace and wages rising in May, making a rate hike by the Federal Reserve in June a near certainty and increasing expectations of a fourth hike this year.

The dollar added 0.15 percent to 109.660 yen JPY= following a rise of 0.6 percent on Friday.

The euro was a shade higher at $1.1665 EUR= after losing roughly 0.3 percent on Friday.

The single currency still remained in sight of a 10-month low of $1.1510 set earlier last week when concerns over Italian politics peaked in the global markets.

·         U.S. Treasury yields rose on Friday, with benchmark 10-year notes on track for their largest one-day yield increase in two weeks, after data showed the world’s largest economy created more jobs than expected in May, cementing expectations of at least two more rate hikes by the Federal Reserve.

U.S. 10-year yields, which move inversely with prices, climbed 8 basis points, the largest daily rise since mid-May. U.S. 30-year yields also had a significant gain, up nearly 8 basis points on the day, the most in two weeks as well.

In mid-morning trading, U.S. 10-year yields rose 2.905 percent US10YT=RR, from Thursday’s 2.822 percent.

U.S. 30-year yields also advanced to 3.058 percent US30YT=RR, compared with 2.985 percent late Thursday.

U.S. two-year yields US2YT=RR, meanwhile were likewise up at 2.479 percent, from 2.411 percent on Thursday.

·         U.S. job growth accelerated in May and the unemployment rate dropped to an 18-year low of 3.8 percent, pointing to rapidly tightening labor market conditions, which could stir concerns about inflation.

The closely watched employment report released by the Labor Department on Friday also showed wages rising solidly, cementing expectations that the Federal Reserve will raise interest rates this month and boosting the probability of two more hikes later in the year. It renewed fears about the economy overheating.

·         U.S. construction spending rebounded more than expected in April as investment in private construction projects notched its biggest gain since 2012, offsetting a drop in public outlays.

The Commerce Department said on Friday construction spending surged 1.8 percent, the largest increase since January 2016, after an unrevised 1.7 percent decline in March.

·         The U.S. Federal Reserve is increasingly likely to raise rates a fourth time this year after a government report showed employers added more jobs than expected in May, bets by traders in short-term interest-rate futures showed.

Traders remain quite confident of rate increases in June and September, prices of the futures show, and see about a 36 percent chance of a rate hike in December, up from about 32 percent before the report. The Fed has raised rates once this year so far, in March. Traders also increased bets on further rate increases in 2019.

·         The United States wants trade talks in Beijing this weekend to result in structural changes to China’s economy, in addition to increased Chinese purchases of American goods, U.S. Treasury Secretary Steven Mnuchin said on Saturday.

·         China warned the United States on Sunday that any agreements reached on trade and business between the two countries will be void if Washington implements tariffs and other trade measures, as the two ended their latest round of talks in Beijing.

·         After all the condemnation of U.S. tariffs on EU metal exports and calls for unity, the European Union still has two decisions to make - how hard to hit back at the United States and whether to engage in trade talks with Washington.

EU countries have also given broad support to its plan to set its own duties of 25 percent on 2.8 billion euros ($3.3 billion) of U.S. exports, including bourbon and motor-bikes to “rebalance” the U.S. tariffs on 6.4 billion euros of EU metals.

This rebalancing could enter force from June 20, with tariffs on a second list of products from March 2021, although this will first need a formal decision by the EU’s 28member states.

·         Finance leaders of the closest U.S. allies vented anger over the Trump administration’s metal import tariffs on Saturday, ending a three-day meeting with a stern rebuke of Washington and setting up a heated fight at a G7 summit next week in Quebec.

The 25 percent steel and 10 percent aluminum tariffs were imposed this week on Mexico, Canada and the European Union after temporary exemptions expired.

“We’re concerned that these actions are actually not conducive to helping our economy, they actually are destructive, and that is consistently held across the six countries that expressed their point of view to Secretary Mnuchin,” Canadian Finance Minister Bill Morneau said at a news conference after the meeting ended in the Canadian mountain resort town of Whistler, British Columbia.

·         Britain won’t sign up to any trade deal with the United States if it is not in its own interest, trade minister Liam Fox said on Saturday, after U.S. tariffs on metals imports drew a rebuke from one of Washington’s major European allies.

Britain has talked up the prospect of a trade deal with the United States as it prepares to leave the European Union, its biggest trading partner, next year.

·         Britain will have a good set of proposals on Brexit policy ready for a meeting of European Union leaders this month, interior minister Sajid Javid said on Sunday, adding that he expected a positive response from Brussels.

·         Bank of Japan Governor Haruhiko Kuroda said on Saturday that inflation had recently been weak despite a steady economic expansion, signaling the bank’s readiness to maintain its massive stimulus program.

Kuroda also voiced concern over the damage escalating trade frictions could inflict on global growth, but repeated his view that the world’s third-largest economy was on track for a moderate expansion.

·         U.S. President Donald Trump, in a complete reversal, said on Friday he would hold a summit with North Korean leader Kim Jong Un on June 12 in Singapore in the latest twist in the high-stakes diplomacy over eliminating Pyonyang’s nuclear arms program.

·         Giuseppe Conte was sworn in on Friday as Italy’s prime minister, heading western Europe’s first anti-establishment government bent on overhauling European Union rules on budgets and immigration.

Conte, a little-known 53-year-old law professor, is backed by the 5-Star Movement which grew out of a grassroots protest network, and the right-wing League who together have issued a budget-busting agenda of tax cuts and higher welfare spending.

·         Spain’s new Prime Minister Pedro Sanchez, propelled to power by an unlikely alliance of rival parties, on Sunday worked on putting together a minority government which a close aide said would not include ministers from the hard-left Podemos party.

The Socialist party leader, a pro-European who is a newcomer to government, says he wants his government to last until mid-2020, when the parliamentary term ends.

Sanchez rose to power unexpectedly as a result of a corruption scandal that toppled conservative Mariano Rajoy. But with only 84 out of 350 seats in parliament, it is unclear how long a Sanchez government can last.

Podemos, which helped Sanchez to oust Rajoy, said it wants to be in the government. The anti-austerity party wants generous welfare policies and tougher regulations and taxes on banks.

A single-party Socialist government with 84 lawmakers would be “more unstable than one that includes other political forces,” Pablo Echenique, a leading member of Podemos, told reporters.

·         Oil prices retreated on Friday after strengthening early in the session as U.S. President Donald Trump’s remarks on trade led the dollar to strengthen against other currencies, weakening greenback-denominated commodities including crude.

U.S. West Texas Intermediate crude CLc1 fell 48 cents to $66.56 a barrel by 12:03 p.m. EDT [1603 GMT]. For the week, WTI was on track for a 1.9 percent fall, adding to last week’s near 5 percent decline.

Global benchmark Brent LCOc1 fell 91 cents to $76.65 per barrel. It was set to rise 0.3 percent for the week.

 WTI’s discount to Brent WTCLc1-LCOc1 widened to $11.57 a barrel, the largest since 2015, before narrowing to $10.19 a barrel as both grades retreated.

·         Trump told Canada and the European Union to do more to bring down their trade surpluses, a day after hitting the two U.S. allies and Mexico with import tariffs on their steel and aluminum.

The president’s comments led the dollar .DXY to strengthen and dollar-denominated commodities to sell off, said John Kilduff, a partner at Again Capital Management.

 

Reference: Reuters