• The U.S. dollar strengthened on Wednesday as the market put aside trade tension fears and focused on the Labor Department’s expectation-beating inflation report, which increased prospects that the Federal Reserve will raise interest rates another two times this year.
A struggle by employers to fill jobs shows the U.S. economy is strong, and the rise in housing and stock prices is not a sign of a risky build-up in leverage in the financial system, the head of the New York Federal Reserve Bank said on Wednesday.
• Against the Japanese yen JPY=, the dollar broke through the psychologically significant barrier of 112 yen for the first time since Jan. 10, rising as much as 1.3 percent to a top of 112.17 yen. Wednesday's strong flows into the dollar/yen trade continued a trend that began after the United States last week reported decent employment data and a pickup in wages.
Both the yen and the dollar act as safe-haven investments, but the strength of the greenback against the yen suggests investors are reflecting faith in the U.S. economy rather than seeking safety.
• Some analysts downplayed the announcements. “I think most investors are looking at this trade war and thinking ‘it’s not going to happen,’” said Michael Diaz, head of foreign exchange at XE.
• The dollar index .DXY, which measures the currency against a basket of six rivals, was up 0.7 percent over the day to a high of 94.77. After a brief respite following news that European Central Bank policymakers may increase the pace of rate hikes, the euro fell back near daily lows, last at $1.17.
• China accused the United States of bullying and warned it would hit back after the Trump administration raised the stakes in their trade dispute, threatening 10percent tariffs on $200 billion of Chinese goods in a move that rattled global markets.
• NATO leaders will try on Thursday to move beyond Donald Trump’s demands for higher defense spending, and focus on ending the long war in Afghanistan, in the second day of a summit in Brussels underscored by transatlantic tensions.
• NATO leaders on Wednesday called on all nations to maintain “decisive pressure” on North Korea, including by fully implementing United Nations sanctions, to persuade it to give up it nuclear, chemical and biological weapons.
The allies also expressed concern about Iran’s intensified missile tests and said the alliance was committed “to permanently ensuring that Iran’s nuclear program remains peaceful”.
• Democrats on Wednesday were reorienting their uphill push to block U.S. Senate confirmation of President Donald Trump’s nominee to the Supreme Court, moving healthcare to the center of their strategy and putting less emphasis on abortion rights.
No matter the top issue, Democrats will have a hard time derailing the nomination of Judge Brett Kavanaugh.
Trump’s Republicans have a 51-49 Senate majority, enough to confirm Kavanaugh if they stick together. But they have little margin for error and Democrats see healthcare as a potential wedge issue.
• The next meeting about the North American Free Trade Agreement will likely take place in Washington during the last week of July, Mexican Economy Minister Ildefonso Guajardo said on Wednesday.
• British Prime Minister Theresa May will set out a blueprint on Thursday for what her government calls “a principled and practical Brexit”, putting at its core a plan for a free trade area for goods that has angered many in her party.
• Global benchmark Brent crude oil had its biggest one-day drop in two years on Wednesday as escalating U.S.-China trade tensions threatened to hurt oil demand, and news that Libya would reopen its ports raised expectations of growing supply.
Brent crude LCOc1 fell $5.46, or 6.9 percent, to settle at $73.40 a barrel. The decline was the largest one-day move on a percentage basis since Feb. 9, 2016. U.S. crude CLc1 fell $3.73, or 5 percent, to $70.38 a barrel.
• OPEC on Wednesday forecast world demand for its crude will decline next year as growth in consumption slows and rivals pump more, pointing to the return of an oil market surplus despite an OPEC-led pact to restrain supplies.
Reference: Reuters
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