Investors fear the charges could complicate high-level trade talks set to begin on Wednesday when China's Vice Premier Liu He will meet with U.S. Trade Representative Robert Lighthizer and others.
"There is a much lesser chance now that we get anything positive out of these trade negotiations," said Nick Twidale, chief operating officer at Rakuten Securities.
"This is likely to be bad for risky assets such as stocks and we expect the dollar/yen and Australian dollar to be under pressure," Twidale said.
The yen, a currency sought out during times of market uncertainty or economic stress, advanced 0.15 percent versus the greenback to 109.19.
The Aussie dollar was down 0.1 percent at $0.7155, but well off its intra-day low after the Reserve Bank of Australia (RBA) board member Ian Harper said that the next move in Australian rates would be up.
· The dollar index, a gauge of its value versus six major peers, was flat at 95.72 and holding close to a two-week low at 0314 GMT.
Market participants are focusing on the Federal Open Market Committee policy meeting between Jan. 29-30, where Chairman Jerome Powell is widely expected to acknowledge growing risks to the U.S. economy as global momentum weakens.
Investors expect the Fed to adopt a more cautious stance on policy than they did in 2018, pressured by signs of a peak in U.S. corporate earnings and the loss of economic momentum both at home and globally.
· Elsewhere, the euro was a bit weaker at $1.1427, but not far off its highest level in more than a week. Traders believe recent weak economic readings in Germany and France, and the European Central Bank's dovish stance, are already priced into the euro.
· Sterling was also slightly down 0.1 percent at $1.3150, pulling back from 3-month highs. Later on Tuesday, lawmakers will debate and vote on British Prime Minister Theresa May's next steps, after the overwhelming rejection of her Brexit plan earlier this month, and have been proposing amendments seeking to shape the future direction of Brexit.
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The positive tone of the pair keeps fading, although the downside potential is limited as long as it holds above 109.05,
Support levels: 109.05 108.75 108.40
Resistance levels: 110.00 110.40 110.85
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Support levels: 1.3140 1.3105 1.3065
Resistance levels: 1.3185 1.3220 1.3260
· The United States on Monday announced criminal charges against China’s Huawei Technologies Co Ltd, escalating a fight with the world’s biggest telecommunications equipment maker which denies wrongdoing, and coming days before trade talks with Beijing.
The Justice Department charged Huawei and its chief financial officer with conspiring to violate U.S. sanctions on Iran by doing business through a subsidiary it tried to hide and that was reported on by Reuters in 2012 and 2013.
In a separate case, the Justice Department said Huawei stole robotic technology from T-Mobile US Inc. Huawei has said the companies settled their dispute in 2017.
· The U.S. government’s indictments against Huawei Technologies Co Ltd are unfair and immoral, a spokesman for China’s industry and information technology ministry said on Tuesday.
Huawei said it was “disappointed” to learn of the charges. It said it had sought to discuss them with U.S. authorities “but the request was rejected without explanation”.
“The Company denies that it or its subsidiary or affiliate have committed any of the asserted violations..., is not aware of any wrongdoing by Ms. Meng, and believes the U.S. courts will ultimately reach the same conclusion.”
· The development is likely to upset talks between Beijing and Washington this week as part of negotiations intended to walk back trade tensions between the globe’s two largest economies.
U.S. President Donald Trump said in December he could intervene in Meng’s case if it would serve national security interests or help close a trade deal with China.
U.S. Commerce Secretary Wilbur Ross said the charges are “wholly separate” from the trade negotiations.
· A Chinese delegation led by Vice Premier Liu He arrived in Washington, D.C. on Monday for economic and trade negotiations, the official Xinhua news agency reported on Tuesday.
The delegation includes China’s central bank Governor Yi Gang as well as the vice chair of China’s state planner and the vice finance minister, the report said, without providing details on the agenda.
· U.S. Treasury Secretary Steven Mnuchin said on Monday the United States expects significant progress this week in trade talks with Chinese Vice Premier Liu He, but the two sides will be tackling “complicated issues”, including how to enforce any deal.
The talks, scheduled for Wednesday and Thursday in Washington, will include a meeting between Liu and U.S. President Donald Trump and take place amid worsening tensions between the world’s two largest economies.
Mounting concerns for both countries, including China’s slowing economy and Trump’s need for a political win, could prod both sides toward a “partial, interim deal,” said Eswar Prasad, a Cornell University trade professor and former head of the International Monetary Fund’s China department.
“There remains a vast distance separating the negotiating positions of the two sides, making a comprehensive and durable deal unlikely,” Prasad said.
· The U.S. Commerce Department’s Bureau of Economic Analysis said on Monday it was delaying the release of advance fourth-quarter gross domestic product data scheduled for Wednesday because of the just-ended five-week partial government shutdown.
The record-long shutdown prevented the collection of reports ranging from retail sales to construction spending, which go into the calculation of the GDP report. Economists, investors and businesses count on data from the Commerce Department agencies, including the Census Bureau, which were shuttered during the 35-day partial closure of the government.
BEA spokesman Thomas Dail said no new release dates had been set for the postponed reports and that the agency was consulting with Census and other data suppliers to determine the availability of data used to produce economic indicators.
The government shutdown, which ended on Friday, has also delayed the release of December personal income report due on Thursday and trade data, which was scheduled for next Tuesday. December reports on durable goods orders, retail sales, housing starts and new home sales have also been postponed.
· The government report on U.S. gross domestic product, a major measure of the country’s economic health, will be released next week, White House economic adviser Larry Kudlow told reporters on Monday, as federal agencies work to return to normal after a partial shutdown that put them on pause for more than a month.
“I still think the economy is very strong,” Kudlow said at a White House briefing. “The Commerce Department is reopening. We’re going to get a GDP report probably next week. We’re going to get a jobs report this Friday.”
· Oil prices crept up on Tuesday after Washington imposed sanctions on Venezuelan state-owned oil firm PDVSA in a step set to severely curb the OPEC member's crude exports to the United States.
Despite the move, which comes as the U.S government looks to pile pressure on sitting President Nicolas Maduro to step down, traders said ample global oil supply and an economic slowdown especially in China were keeping crude prices in check.
U.S. West Texas Intermediate (WTI) crude futures were at $52.12 per barrel at 0351 GMT, up 13 cents, or 0.3 percent, from their last settlement.
International Brent crude oil futures were at $60.05 per barrel, up 12 cents, or 0.2 percent.
· "The more significant issue is (global) supply, and despite OPEC's best efforts (to reduce output) there seems to be plenty of it," said Jeffrey Halley of futures brokerage OANDA in Singapore.
Global oil supply remains high largely due to a more than 2 million bpd increase in U.S. crude oil production last year, to a record 11.9 million bpd.
There are also concerns in the oil industry that crude demand could stutter amid an economic slowdown.
Reference: Reuters, CNBC, FX Street, Daily FX
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