· The dollar rallied against a basket of currencies on Tuesday ahead of Wednesday’s Federal Reserve policy decision, while the British pound whipsawed after Prime Minister Theresa May defeated a rebellion in parliament over Brexit plans.
The dollar index, which measures the greenback against a basket of six currencies, was last at 93.808, just below the day’s high of 93.911, boosted further by U.S. President Donald Trump’s stunning concession to North Korean leader Kim Jong Un on Tuesday about halting military exercises.
· The Fed began its two-day meeting, where it is widely expected to raise interest rates for the second time this year. Earlier on Tuesday, data showed U.S. consumer prices rose in May, matching analysts’ forecasts and reinforcing the view the Fed would raise short-term interest rates gradually.
Reports that Fed Chair Jerome Powell was considering holding a news conference and taking questions after every Fed meeting also supported the dollar. The Fed currently holds a news conference after every other meeting and is scheduled to hold one on Wednesday.
· The pound jumped before paring gains on Tuesday after British Prime Minister Theresa May saw off a rebellion in parliament over amendments to a bill for the country’s exit from the European Union next year that had threatened to undermine her authority.
The pound strengthened 0.3 percent against the dollar to $1.3424 GBP= after parliament voted to back the government on several amendments to the EU withdrawal bill. It then retraced its moves and finally settled around $1.3373.
· “If you’re just trading headlines, you think that’s bad. But when you dig into the details ... the amendment was throttled down with the understanding that there is going to be much more progress moving toward a softer Brexit further on,” said Mark McCormick, North American head of FX strategy at TD Securities in Toronto.
· Three of the world’s top central banks - the Fed, the European Central Bank and the Bank of Japan - meet this week.
The ECB meets on June 14, when it could signal intentions to start unwinding its massive bond purchasing program. The Bank of Japan will meet June 14-15, but will not offer an immediate report following the meeting, instead publishing a summary of opinions on June 25.
· The new Italian minister for EU Affairs Paolo Savona said on Tuesday the European Central Bank should have a statute similar to the one of other central banks, including the U.S. Federal Reserve.
· With the Federal Reserve virtually guaranteed to raise interest rates at its two-day meeting this week, investors are focused on how the U.S. central bank characterizes its monetary policy as borrowing costs return to more normal levels amid an ongoing economic expansion.
The meeting began on Tuesday as scheduled, with fresh U.S. economic data showing inflation still on track and financial markets remaining calm despite rising global trade tensions.
· U.S. President Donald Trump made a stunning concession to North Korean leader Kim Jong Un on Tuesday about halting military exercises, pulling a surprise at a summit that baffled allies, military officials and lawmakers from his own Republican Party.
At a news conference after the historic meeting with Kim in Singapore, Trump announced he would halt what he called “very provocative” and expensive regular military exercises that the United States stages with South Korea.
That was sure to rattle close allies South Korea and Japan. North Korea has long sought an end to the war games.
Trump and Kim promised in a joint statement to work toward the “denuclearization” of the Korean Peninsula, and the United States promised its Cold War foe security guarantees. But they offered few specifics.
· North Korean leader Kim Jong Un said it was “urgent” for North Korea and the United States to halt “irritating and hostile military actions against each other” during talks on Tuesday with U.S. President Donald Trump, North Korea’s state media said on Wednesday.
The report added Trump said he “understood” and promised to halt joint U.S.-South Korea military exercises while talks with the North were continuing.
Kim and Trump invited each other to their respective countries and both leaders “gladly accepted”, KCNA reported.
There was little else mention of denuclearisation of North Korea in the statement, which mainly focused on stopping hostilities between North Korea and the United States.
· Iran warned North Korean leader Kim Jong Un on Tuesday against trusting U.S. President Donald Trump, saying he could cancel their denuclearization agreement within hours.
Tehran cited its own experience in offering the advice to Kim a month after Washington withdrew from a similar deal with Iran.
· The U.S. government had a $147 billion budget deficit in May, an increase of 66 percent from the same month last year as the ledger took a hit from declining revenue and higher spending, according to Treasury Department data released on Tuesday.
Treasury reported a budget deficit of $88 billion in the same month last year, the department’s monthly budget statement showed.
· U.S. Senator Bob Corker accused his fellow Republicans of being afraid to stand up to President Donald Trump on Tuesday, as his legislation to block the president’s ability to impose tariffs on national security grounds hit a roadblock in Congress.
“‘We might poke the bear’ is the language I have been hearing in the hallways,” Corker said in an emotional Senate speech. “The president might get upset with us as United States senators if we vote on the Corker amendment, so we’re going to do everything we can to block it.”
· Bitcoin fell to a two-month low on Tuesday, sliding in three of the last four sessions on nagging regulatory and security concerns after the weekend hacking of South Korean cryptocurrency exchange Coinrail.
The original virtual currency is nearing its lowest level of the year of just under $6,000 BTC=BTSP on the Bitstamp platform. It fell to a low of below $6,500 and last traded down 4.7 percent at $6,551.48.
· Oil prices were mixed on Tuesday, with U.S. crude settling higher before falling in post-settlement trading, and Brent slipping as investors prepared for a key meeting of the OPEC producer group next week.
Brent crude futures LCOc1 fell 58 cents to settle at $75.88 a barrel, while U.S. West Texas Intermediate crude futures CLc1 climbed 26 cents to $66.36.
Reference: Reuters
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