• The dollar retreated from a three-week high on Wednesday as investors cashed in on gains the currency made after two days of testimony by U.S. Federal Reserve Chairman Jerome Powell reinforced a strong economic outlook.
In congressional testimony on Tuesday and Wednesday Powell said he believed the United States was on course for years more of steady growth, and played down the risks to the U.S. economy of an escalating trade conflict.
Against a basket of six major currencies, the dollar rose to a three-week high of 95.4 before settling around 95.08, up 0.2 percent.
The Fed is expected to hike rates two more times in 2018 to tackle rising inflationary pressures. Comparatively, the ECB is expected to start raising rates only in mid-2019.
With U.S. rates continuing to rise and most other major central banks taking only tentative steps towards monetary normalization, many analysts expect more dollar upside. RBC is forecasting a year-end euro/dollar of $1.12.
The dollar rallied to as high as 113.13 against the yen, its strongest since Jan. 9. It was last at 112.85, slightly down on the day. The euro fell 0.16 percent to $1.1640.
• Housing starts tumbled 12.3 percent to a seasonally adjusted annual rate of 1.173 million units last month, the lowest level since September 2017, the Commerce Department said. The percent drop was the largest since November 2016 and both single and multi-family home construction declined in June.
Data for May was revised down to show starts rising at a 1.337 million-unit rate instead of the previously reported 1.350 million-unit rate. Starts fell in all four regions last month.
Building permits dropped 2.2 percent to a rate of 1.273 million units, also the lowest level since September 2017.
• A group representing major automakers will tell the U.S. Commerce Department on Thursday that imposing tariffs of 25 percent on imported cars and parts would raise the price of U.S. vehicles by $83 billion annually and cost hundreds of thousands of jobs.
• A threat by the U.S. government to impose tariffs of up to 25 percent on imported auto parts could hit consumers in unexpected ways: higher repair costs, insurance premiums and even the theft of more cars for their parts, the industry said.
• A prolonged U.S. trade war with China and Europe would dent global economic growth and force investors to reassess the profitability of U.S. companies, some of the biggest hedge funds and private equity investors in the United States warned at an investment conference on Wednesday.
The money managers all spoke at the conference on Wednesday, two days after Laurence Fink, who runs $6.3 trillion investment firm BlackRock, warned that deepening trade friction could sufficiently unnerve investors to send markets tumbling as much as 15 percent.
• Japanese business sentiment slipped in July, a Reuters poll found, reflecting companies’ fear of fallout from an intensifying trade dispute between the United States and China, even though Japan’s economy is expected to bounce back from a first-quarter contraction.
• Steve Bannon, former top advisor to Donald Trump, said Wednesday that the U.S. has been embroiled in a trade conflict with China for decades.
"We're at war with China," Bannon said at the Delivering Alpha Conference, praising Trump for taking on the Chinese. "We're winning."
For Bannon, the war against China can only end in one way and that's with the U.S. as victors.
• The White House struggled on Wednesday to contain a political outcry and confusion over U.S. President Donald Trump’s summit with Russian President Vladimir Putin, denying Trump ever meant to say that Moscow was no longer targeting the United States.
• Trump, facing uproar over his failure to confront Putin over Russia’s 2016 U.S. election meddling, adopted his usual defiant posture two days after their Helsinki summit and called his critics deranged.
U.S. President Donald Trump said in a television interview on Wednesday he accepted Director of National Intelligence Dan Coats’ assessment that Russia continues to be a threat to U.S. elections.
• President Donald Trump said on Wednesday he holds Russian President Vladimir Putin personally responsible for Russia’s meddling in the 2016 U.S. presidential election.
Sanctions targeting key Russian economic sectors would kick in swiftly if U.S. authorities determined the Kremlin had meddled again in a U.S. election, under a bill gaining momentum in the Senate on Wednesday.
It was uncertain whether such a bill, or any other legislative response, could pass Congress after President Donald Trump at a Helsinki summit on Monday gave credence to Russian denials on the question of its interference in the 2016 U.S. election.
• Mexican Economy Minister Ildefonso Guajardo said on Wednesday that the goal of Canada, the United States and Mexico is to be in a position to sign a new North American Free Trade Agreement (NAFTA) by the end of November.
• Oil prices rose on Wednesday after U.S. government data indicated bullish demand for gasoline and distillates, which overshadowed a surprise build in U.S. crude inventories and U.S. crude oil production hitting 11 million bpd for the first time.
Brent crude futures rose 74 cents to settle at $72.90 a barrel, a one percent gain. The contract hit a session low of $71.19 a barrel, its lowest since April 17.
West Texas Intermediate (WTI) crude futures rose 68 cents, or one percent, to settle at $68.76 a barrel.
• U.S. crude stocks surprised the market and rose by 5.8 million barrels last week as oil production hit 11 million barrels a day for the first time ever, the Energy Information Administration said on Wednesday.
Reference: Reuters, CNBC
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