· The British pound held firm in early Asian trade on Thursday, after making its biggest gains in seven months the previous day, following comments from the European Union’s chief negotiator offering Britain close ties after Brexit.
The pound surged as fears that Britain could go through a hard Brexit eased after Michel Barnier signalled an accommodative stance towards London in ongoing talks.
Barnier said that the bloc was prepared to offer Britain a partnership, though no “single market a la carte”, which improved risk sentiment.
Sterling rose to a four-week high of $1.3039, extending its gains after surging more than 1.2 percent overnight, the largest daily gain since Jan. 24.
The dollar index against a basket of six major currencies struggled near a four-week low of 94.434 touched on Tuesday, dragged down by the pound’s rally.
The euro was steady at $1.1706 after edging up 0.1 percent the previous day. The dollar was flat at 111.71 yen after rising 0.4 percent overnight.
· Investors kept a wary eye on the Turkish lira, which stretched losses and retreated to a two-week trough after Moody’s on Wednesday downgraded 20 Turkish banks in a further blow to a country already gripped by a financial crisis and stuck in a diplomatic row with the United States.
· "It does make it easier for the Fed to say this is why it's appropriate that we continue to normalize," said Michelle Girard, chief U.S. economist at NatWest Markets.
Girard expects core PCE to be at 2 percent again in August, and to peak at 2.1 percent in September. But while she sees a firmer trend, she says it should hold just above 2 percent for the rest of the year.
The Fed is expected to hike rates in September and in December, but the market has been debating what policymakers will do next year, despite their forecast for three rate hikes in 2019. Lagging inflation has been one factor in the argument made by some strategists and economists that the Fed could pause at some point in the next year.
Girard does not expect the Fed to keep to its 2019 forecast of three rate hikes, and she sees just two hikes next year as it gets closer to the neutral rate, or the interest rate level that it no longer believes is stimulative.
She said the slightly higher inflation level fits with Fed Chair Jerome Powell's comments last week that the Fed can continue on a gradual path, and that the economy is strong while inflation is not expected to get out of hand. "There's no reason for them to move at a quicker pace," she said.
· The Chinese government will continue implementing measures in order to cushion its economy from the impact of the ongoing trade spat with the U.S., a leading China economist said Wednesday.
"We are not expecting any major growth correction because we think the potential impact from trade tariffs will be partially cushioned by the policy easing measures taken by the policy makers," Robin Xing, chief China economist at Morgan Stanley, told CNBC at the Morgan Stanley Technology, Media and Telecom Conference in Beijing.
Market watchers are now keeping their eyes on a fresh round of U.S. tariffs on $200 billion worth of Chinese goods expected later this year.
If the U.S. imposes those additional tariffs, the impact could be "amplified" by how connected supply chains in East Asia are to China, Xing said
In fact, the trade war's disruption to supply chains could cut 0.7 percentage points from China's growth, he said.
· Japan’s retail sales rose for a ninth straight month in July from a year earlier, handily beating economists’ forecasts, in a sign private consumption is supporting the world’s third largest economy.
July’s 1.5 percent annual increase in retail sales topped the Reuters poll median forecast for 1.2 percent, trade ministry data showed on Thursday. It followed a 1.7 percent gain in June.
· The European Union’s chief Brexit negotiator Michel Barnier said on Thursday the bloc must prepare for a no-deal Brexit, even if its goal was an orderly exit.
He said the issue of the Irish border with Northern Ireland was “the most sensitive point” of the negotiations. Of a solution to the issue, he added: “I think that is possible.”
· U.S. house prices are set to rise this year at the fastest pace since 2015 and at more than double the rate of pay growth and consumer price inflation for the sixth year in a row, a Reuters poll of property market experts showed on Thursday.
· The leaders of the United States and Canada expressed optimism on Wednesday that they could reach new NAFTA deal by a Friday deadline as negotiators prepared to talk through the night, although Canada warned that a number of tricky issues remained.
· Activity in China’s vast factory sector likely slowed for the third straight month in August as domestic demand remained weak and exporters faced rising uncertainties from the escalating trade war with the United States, a Reuters poll showed.
While the August manufacturing slowdown is expected to be modest, it will reinforce views that the world’s second-largest economy is continuing to lose steam even as Washington readies even tougher tariffs on Chinese goods.
· U.S. President Donald Trump has signed proclamations permitting targeted relief from steel and aluminum quotas from some countries, the U.S. Commerce Department said on Wednesday.
Trump, who put in place tariffs on steel and aluminum imports in March, signed proclamations allowing relief from the quotas on steel from South Korea, Brazil and Argentina and on aluminum from Argentina, the department said in a statement.
· China’s commerce ministry said on Thursday that trade issues with the United States can only be resolved through talks as equals, adding that China will stick to the steady opening of its economy regardless of U.S. actions.
· Oil prices rose on Thursday, extending gains on growing evidence of serious disruptions to crude supply from Iran and Venezuela and after a fall in U.S. crude inventories.
Benchmark Brent crude oil LCOc1 was up 30 cents a barrel at $77.44 by 0745 GMT. U.S. light crude CLc1 was 30 cents higher at $69.81.
Brent has risen by almost 10 percent over the last two weeks on widespread perceptions that the global oil market is tightening and may run short in the next few months as U.S. sanctions restrict crude exports from Iran.
Reference: Reuters, CNBC 
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