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• Fed: Letting inflation run too hot could lead to 'a significant economic downturn'

Federal Reserve officials worry that letting the U.S. economy run too strong could cause major problems down the road if left unchecked, according to minutes from the most recent central bank meeting.

Some members expressed “concern that a prolonged period in which the economy operated beyond potential could give rise to heightened inflationary pressures or to financial imbalances that could lead eventually to a significant economic downturn,” the meeting summary released Thursday stated.

As a result, almost all officials at the central bank believe they should continue to raise interest rates on a regular basis. That comes even amid substantial worry that current tensions between the U.S. and its trading partners could stall the growth the economy has seen this year.

Fed business contacts “expressed concern about the possible adverse effects of tariffs and other proposed trade restrictions, both domestically and abroad, on future investment activity.” Moreover, they indicated “capital spending had been scaled back or postponed as a result of uncertainty over trade policy.”

• The dollar fell to three-week lows on Thursday as strong German industrial orders boosted the euro while U.S. data showed private sector jobs rose less than expected in June, weighing on the greenback along with nagging trade concerns.

In afternoon trading, the dollar index was down 0.2 percent at 94.467. Earlier, it had dropped to a three-week low.

The euro rallied to a three-weak peak and last changed hands at $1.1681, up 0.4 percent.

In February, the dollar hit its lowest in more than three years, and has rallied nearly 7 percent since then.

The dollar briefly extended losses after minutes of the latest Federal Reserve meeting showed policy makers remained upbeat on the U.S. economic outlook but worried about a trade war.

In recent weeks, the dollar benefited from mounting trade tensions, said John Doyle, director of markets, at Tempus Consulting in Washington. “But we’re seeing a reversal of those gains today and there are several reasons for that, such as what’s happening in the euro zone.”

He also cited “profit-taking and repositioning as we enter the new quarter as well.”

Investors now are looking to Friday’s U.S. non-farm payrolls report.

• U.S. data showed private payrolls increased last month, but were lower than forecast, while jobless claims rose unexpectedly last week. This data weighed on the dollar, but the currency trimmed losses after a higher-than-expected U.S. services index.

• U.S. services sector activity picked up in June amid strong growth in new orders, but trade tariffs and a shortage of workers were starting to strain the supply chain, which could slow momentum in the coming months.

• President Donald Trump said on Thursday the United States may ultimately impose tariffs on more than a half-trillion dollars’ worth of Chinese goods as the world’s two largest economies hurtled toward the start of a trade war.

Trump confirmed that the United States would begin collecting tariffs on $34 billion in Chinese goods at 12:01 a.m. (0401 GMT) on Friday and warned that subsequent rounds could exceed $500 billion - roughly the amount that the United States imported from China last year.

“You have another 16 (billion dollars) in two weeks, and then, as you know, we have $200 billion in abeyance and then after the $200 billion, we have $300 billion in abeyance. Ok? So we have 50 plus 200 plus almost 300,” Trump told reporters aboard Air Force One.

• Chinese foreign minister Wang Yi said trade protectionism was “short-sighted” behaviour and would harm all sides, the country’s foreign ministry said in a statement on Friday, amid sharpening trade tensions between Washington and Beijing.

• U.S. President Donald Trump said on Thursday he believes that North Korean leader Kim Jong Un sees a different future for his country, as America’s top diplomat heads to Pyongyang for talks on denuclearization.

• President Donald Trump will drill down on Russia’s “malign activity” during summits with NATO allies and President Vladimir Putin, U.S. officials said on Thursday, signaling a harder line against Moscow than Trump traditionally has sought to take.

The U.S. president, whose 2016 election campaign is being probed for possible collusion with Russia, has said repeatedly he wants to have a good relationship with Washington’s former Cold War foe, despite tensions between Russia and the West over Ukraine, Syria, and alleged election meddling around the world.

• Prime Minister Theresa May will propose a new plan on Friday to ease trade and give Britain more freedom to set tariffs after Brexit, in a last-ditch attempt to unite her divided government on how to leave the European Union.

May is under increasing pressure from EU officials, companies and some lawmakers to move faster with the negotiations to leave the EU, a departure that will be Britain’s biggest trading and foreign policy shift in half a century.

• The parties in Germany’s ruling coalition on Thursday reached agreement on a package of measures to deal with asylum-seekers who have already registered in other European Union states, and vowed to push ahead with an immigration law before year’s end.

The two-page agreement, reached after a short meeting at the historic Reichstag building, ends a dispute that had threatened to bring down Chancellor Angela Merkel’s ‘grand coalition’ just months after it took power, and left the four-term leader politically weakened.

The parties agreed to speed up the process of returning migrants who have applied for asylum in other EU states to those countries, as mandated by current EU law, but only if agreements were in place with the country where they first registered.

Full implementation would require signing deals with Italy and other countries that have been unwilling to take back migrants.

• Oil fell on Thursday after U.S. government data showed an unexpected build in crude oil stockpiles.

U.S. crude futures CLc1 fell $1.20 to settle at $72.94 a barrel, retreating from Tuesday’s 3-1/2-year high of over $75. Brent crude futures LCOc1 lost 85 cents to settle at $77.39 a barrel.

• U.S. crude stockpiles rose 1.3 million barrels last week, according to U.S. Energy Information Administration data. Analysts had expected a 3.5 million-barrel draw.

Reference: Reuters, CNBC