• The U.S. dollar weakened against the euro on Wednesday after the United States and the European Union agreed to deescalate a transatlantic trade conflict, leaders from the two trading partners announced in a joint statement in Washington.
The dollar had strengthened in the past six months in part due to deteriorating global trade relations. Rising U.S. interest rates have also propped up demand for the greenback.
“Everybody’s trying to figure out if (U.S. President Donald Trump) is making deals or not,” said Axel Merk, president of the Merk Hard Currency Fund in Palo Alto, California.
The euro rose to $1.1728 following the report, up 0.4 percent. Against a basket of six major currencies .DXY, which is heavily weighted toward the euro, the dollar fell0.44 percent during the session.
The trading partners agreed to hold off on further tariffs while negotiations were taking place. Trump and European Commission President Jean-Claude Juncker said they were also working to eliminate tariffs and subsidies on non-auto industrial goods.
The dollar fell 0.2 percent to 110.97 yen on Wednesday. The Japanese currency found some support early this week on expectations the Bank of Japan might be a step closer to scaling back some of its aggressive monetary stimulus.
The offshore yuan CNH= strengthened 0.8 percent against the dollar to 6.753 yuan as traders took profits after the Chinese currency hit its weakest level since June2017 on Tuesday.
• European Commission President Jean-Claude Juncker’s deal on Wednesday to end U.S. President Donald Trump’s threat of new tariffs was hailed as a major success by EU officials and other European governments.
“Breakthrough achieved that can avoid trade war and save millions of jobs! Great for global economy!” tweeted German Chancellor Angela Merkel’s Economy Minister Peter Altmaier as news of the Washington deal broke late in the evening in Europe.
In the end, Trump agreed to resolve arguments over the steel and aluminum tariffs he introduced to European dismay earlier this year, to scrap any other planned penalties and to join in a dialogue with Brussels on enhancing trade. The EU will work to ease U.S. imports, including soybeans and natural gas.
• A top German industry group gave a cautious welcome to solutions proposed by U.S. President Donald Trump and European Commission President Jean-Claude Juncker to avert a trade war, but warned that U.S. auto tariffs were not completely off the table yet.
• The European Central Bank is all but certain to keep policy on hold on Thursday, arguing that the risks from an amplifying global trade conflict don’t warrant a deviation from its plan to gently exit its easy-money policy of the last few years.
With inflation rebounding and employment at a record high, the ECB decided last month to end its 2.6 trillion euro ($3.0 trillion) bond buying scheme by the close of the year, taking its biggest step yet toward removing the stimulus credited with dragging the euro zone out of years of stagnation.
Still, with growth slowing and sentiment weighed down by a slowly escalating trade war, the ECB also promised record low interest rates at least through next summer. That suggested it would wean the euro area off its stimulus by the smallest of increments, for fear that even a small amount of turbulence could derail the recovery in inflation.
Draghi is also likely to avoid providing a more precise timing for the first rate hike, sticking with the ECB’s wording for steady rates “through the summer” of 2019.
With fresh buying due to end this year, the reinvestment of cash from expiring bonds will become a more significant policy tool, and Draghi has said that updated rules on how to spend this cash are likely to come in the coming months.
• British builders started work on slightly fewer new homes in the three months to the end of June, hit by a sharp fall in London, but overall construction remained close to its highest level since the global financial crisis, industry data showed.
• The Bank of Japan will consider at next week’s rate review changing the composition of exchange-traded funds (ETF) it buys as part of is massive stimulus program, the Nikkei newspaper reported on Thursday.
The central bank currently buys 6 trillion yen ($54.08 billion) worth of ETFs per year, of which around 1.5 trillion yen is spent on ETFs linked to the Nikkei stock average and roughly 4 trillion yen on those linked to the Topix index.
While maintaining the total amount, the BOJ will change that composition and increase the amount of purchases for Topix-linked ETFs, and decrease buying of Nikkei-linked ETFs, the Nikkei reported without citing sources.
• U.S. President Donald Trump will postpone a second meeting with Russian President Vladimir Putin until next year after the federal probe into Russian election meddling is over, national security adviser John Bolton said on Wednesday.
• Trump said last week he would invite Putin to Washington for an autumn meeting, a daring rebuttal to fierce criticism over their summit in Helsinki, in which he appeared to give credence to the Russian leader’s assertion that Moscow did not interfere in the 2016 U.S. presidential election.
• Oil prices rose for the second consecutive day on Wednesday after U.S. government data showed domestic crude inventories fell to their lowest since February2015, easing worries about oversupply that have weighed on markets in recent weeks.
Brent crude futures rose 49 cents to settle at $73.93 a barrel, a 0.67 percent gain.
U.S. West Texas Intermediate (WTI) crude futures rose 78 cents to settle at $69.30 a barrel, a 1.14 percent gain.
Reference: Reuters
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