· Anxiety about a global trade war spurred demand on Monday for the Japanese yen and Swiss franc, while the euro remained under pressure due to a dispute in Germany’s governing coalition and expectations the European Central Bank will hold interest rates steady into 2019.
The ongoing trade dispute between the United States and China knocked the yuan CNH=D3 to 6.4600 per dollar, its weakest in five months in the offshore market.
The yen was up nearly 0.2 percent against the dollar at 110.48 yen JPY= and about 0.1 percent higher versus the euro at 128.32 yen EURJPY= in early U.S. trading.
The dollar was steady against the euro at $1.1615 EUR= after the Fed flagged more rate hikes are coming and the ECB signaled it will likely keep rates near a record low into the summer of 2019.
· Tensions with the governing coalition in Germany also weighed on the single currency. Chancellor Angela Merkel’s Bavarian allies may defy her by implementing a plan to limit immigration at the German border and risk destabilizing her three-month-old coalition.
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• Donald Trump attacked Germany's Angela Merkel via his favourite medium - Twitter, claiming the German people were turning against her tenuous political coalition over immigration. The jab came as the Chancellor struck a political deal to avert the collapse of her government.
Trump has long been a critic of Merkel's open-door policy toward Syrian refugees fleeing the civil war there. The ongoing fallout of that policy continue to dog Merkel, now in her fourth term, as anti-immigrant and populist pushes make headway across Europe, most recently in Italy.
· The U.S. economy “appears to be in a pretty good place” that should let the Fed continue its steady program of raising interest rates, Atlanta Federal Reserve bank president Raphael Bostic said on Monday, though he feels only one more such increase is needed this year.
· U.S. President Donald Trump threatened on Monday to impose a 10 percent tariff on $200 billion of Chinese goods, escalating a tit-for-tat trade war with Beijing.
In a statement, Trump said he had asked the U.S. trade representative to identify the Chinese products to be subject to the new tariffs. He said the move would be in retaliation for China’s decision to raise tariffs on $50 billion in U.S. goods.
On Friday, Trump said he was pushing ahead with a 25 percent tariff on $50 billion worth of Chinese products, prompting Beijing to respond in kind.
The Chinese response clearly angered Trump.
“China apparently has no intention of changing its unfair practices related to the acquisition of American intellectual property and technology. Rather than altering those practices, it is now threatening United States companies, workers, and farmers who have done nothing wrong,” he said.
· The U.S. Senate passed a $716 billion defense policy bill on Monday, backing President Donald Trump’s call for a bigger, stronger military but setting up a potential battle with the White House over Chinese telecommunications firm ZTE Corp.
Before it can become law, the bill must be reconciled with one already passed by the House of Representatives. That compromise measure must then be passed by both chambers and signed into law by Trump.
· The U.S. Trade Representative’s office said on Monday it expects to complete the public comment period for a second set of tariffs on Chinese goods on July 31, a schedule that would likely make those duties ready for activation by late August.
· Canada is considering all options, including providing financial aid to the auto industry, to cope up with possible U.S. tariffs, a senior federal minister said, even as officials expressed doubt Washington would follow through with a threat to impose the punitive measures.
A Scotiabank analysis released Friday said steel and auto tariffs would knock growth in Canada down to 1.2 percent in 2020 from 2.1 percent in 2018, enough to force the Bank of Canada to cut rates.
· Britain will have more money to spend on its health service when it leaves the European Union, even as it continues to make payments to the bloc, Prime Minister Theresa May said on Monday.
May has pledged to increase funding for the National Health Service by 20 billion pounds by 2023/24, even as some critics said that Britain’s departure from the bloc will weaken, not strengthen, public finances.
· The United States and South Korea have agreed to suspend a joint military exercise scheduled for August, South Korean and U.S. officials said on Monday, following President Donald Trump’s pledge to end “war games” after his summit with North Korean leader Kim Jong Un last week.
· New Spanish Prime Minister Pedro Sanchez will travel to Paris on June 23 for talks with Emmanuel Macron on migration and euro zone reforms, the French presidency said on Monday.
The French presidency said the two leaders would discuss bilateral and European topics, specifically focusing on migration and euro zone reform issues, to prepare for a European leaders summit at the end of June.
· Oil prices rose on Monday in volatile trade as market participants lowered their expectations for how much OPEC might increase production and investors assessed the impact of a trade dispute between the United States and China.
U.S. crude oil CLc1 rose 79 cents a barrel to settle at $65.85. The contract traded at a two-month low of $63.59 early in the session. Brent crude LCOc1 jumped $1.90to $75.34 a barrel.
U.S. crude’s discount to Brent WTCLc1-LCOc1 widened to as much as $9.75 a barrel, after narrowing on Friday.
· China imposed import duties on U.S. products on Friday, and suggested that crude oil tariffs were planned.
That could leave growing volumes of U.S. crude from shale without a buyer, traders said. While the volumes would ultimately get shipped elsewhere, absent China the price could be depressed, traders said.
· Meanwhile, the Organization of the Petroleum Exporting Countries (OPEC) and allied oil producers including Russia meet on June 22 in Vienna. Russia and OPEC kingpin Saudi Arabia are pushing for higher output.
Reference: Reuters, CNBC, The Sydney Moring Herald
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