· The dollar slipped against a basket of currencies on Friday as traders focused on the weaker aspects in the April U.S. payrolls report, brushing aside stronger-than-forecast hiring and a drop in the jobless rate to the lowest in more than 49 years.
In late U.S. trading, an index that tracks the greenback against a basket of six currencies was 0.32% lower at 97.521, adding to its weekly decline of about 0.5%.
The dollar also came under pressure when a measure of U.S. services activity from the Institute for Supply Management posted a surprise drop to a 20-month low in April. Comments from Chicago Fed President Charles Evans and St. Louis Fed President James Bullard supported bets the U.S. central bank might lower key lending rates by the end of the year even though Fed Chairman Jerome Powell said two days earlier he did not see the need to raise or cut rates right now.
· The U.S. jobs machine kept humming along in April, adding a robust 263,000 new hires while the unemployment rate fell to 3.6%, the lowest in a generation, the Labor Department reported Friday.
Nonfarm payroll growth easily beat Wall Street expectations of 190,000 and a 3.8% jobless rate.
Average hourly earnings growth held at 3.2% over the past year, a notch below Dow Jones estimates of 3.3%. The monthly gain was 0.2%, below the expected 0.3% increase, bringing the average to $27.77. The average work week also dropped 0.1 hours to 34.4 hours.
Unemployment was last this low in December 1969 when it hit 3.5%. At a time when many economists see a tight labor market, big job growth continues as the economic expansion is just a few months away from being the longest in history.
· A gauge of U.S. service industries unexpectedly dropped for a second month, slipping to the lowest level since August 2017 in the latest sign of weaker economic momentum at the start of the second quarter.
The non-manufacturing index declined to 55.5 in April from 56.1, according to an Institute for Supply Management survey released Friday that continued to signal expansion. Three of four components fell, with employment reaching a two-year low as new orders also weakened.
· The U.S. dollar was flat against most major currencies on Monday but lost ground to the Japanese yen after U.S. President Donald Trump said he would sharply raise tariffs on Chinese goods this week, risking the derailment of trade talks between Washington and Beijing.
The dollar index, which measures the U.S. currency versus a basket of six major rivals, was up 0.01%.
Increased trade tensions between Washington and Beijing have generally been supportive of the dollar as investors view the United States to be in better shape than its rivals to weather a trade war.
Against the Japanese yen, which tends to benefit during geopolitical or financial stress as Japan is the world’s biggest creditor nation, the dollar fell 0.15% to 110.92 yen. The Japanese yen, widely seen as a safe-haven currency, strengthened to 110.78 against the dollar after seeing lows above 111.6 in the previous week.
Asian currencies were largely weaker with the Chinese yuan slipping almost 1% to near its lowest levels this year, around 6.80 per dollar. Both the Mexican peso and the Turkish lira fell against the U.S. currency
The U.S. dollar index, which tracks the greenback against a basket of its peers, was at 97.539 after touching levels above 97.6 yesterday.
· Chinese Vice Premier Liu He is expected to join a delegation in the United States this week, a potentially positive sign for a trade agreement between the U.S. and China even as the Trump administration says it will hike tariffs on Chinese goods.
The tariff increase will go into effect at 12:01 a.m. on Friday, U.S. Trade Representative Robert Lighthizer told reporters on Monday. But the U.S. would reconsider the duties if talks get back on track, Treasury Secretary Steven Mnuchin also said.
Liu’s presence could be telling: market watchers considered it more likely that the U.S. would hike tariffs on $200 billion in Chinese goods to 25% from 10% if he did not attend the talks. Still, some new roadblocks have emerged ahead of the next round of negotiations.
U.S. officials on Monday accused China of reneging on commitments made as part of the negotiations. Lighthizer described an “erosion of commitments” on the part of the Chinese.
The Chinese team is set to come to Washington on Thursday and Friday, according to Lighthizer. Talks continue, and the two sides are not cutting off discussions after President Donald Trump threatened to increase tariffs already placed on Chinese products and add new duties, the trade official said.
· The U.S. could become one of the most protectionist countries in the world, if President Donald Trump’s latest tariff threat materializes.
Trump tweeted Sunday that the current 10% tariffs on $200 billion worth of Chinese goods will rise to 25% on Friday. He also threatened to impose 25% levies on an additional $325 billion of Chinese goods “shortly.” U.S. duties, already higher than those of most developed economies, would surge to levels above those of many emerging-market countries, where tariffs are more commonplace, CNBC’s Steve Liesman pointed out.
· The Trump administration is deploying a carrier strike group and bombers to the Middle East in response to troubling “indications and warnings” from Iran and to show the United States will retaliate with “unrelenting force” to any attack, national security adviser John Bolton said on Sunday.
With tensions already high between Washington and Tehran, a U.S. official said the deployment has been ordered “as a deterrence to what has been seen as potential preparations by Iranian forces and its proxies that may indicate possible attacks on U.S. forces in the region.”However, the official, speaking on condition of anonymity, said the United States was not expecting any imminent Iranian attack.
· U.S. Secretary of State Mike Pompeo said on Monday the United States has seen activity from Iran that indicated a possible “escalation,” one day after the United States said it would send a carrier strike group to the Middle East to counter a “credible threat by Iranian regime forces.”
“We have continued to see activity that leads us to believe that there’s escalation that may be taking place, and so we’re taking all the appropriate actions, both from a security perspective as well as our ability to make sure the president has a wide range of options in the event that something should actually take place,” Pompeo told reporters.
· Japanese manufacturing activity expanded in April for the first time in three months as companies hired more workers and grew more optimistic about the business outlook, a preliminary survey showed on Tuesday.
But the survey also showed new export orders fell in April at a faster rate than the previous month, in a reminder of the damage to Asia’s exporters from the U.S.-China trade war and weak global demand for semiconductors.
The Markit/Nikkei Japan Flash Manufacturing Purchasing Managers Index (PMI) rose to a seasonally adjusted 50.2 in April from a final 49.2 in the previous month.
· Oil prices edged up on Friday, as strong U.S. economic data boosted demand sentiment and as production losses in sanctions-hit Iran and Venezuela tightened the market.
Still, oil futures posted weekly declines on a jump in U.S. crude inventories reported this week.
U.S. West Texas Intermediate crude futures settled 13 cents higher at $61.94 per barrel, after sinking 2.8% on Thursday. WTI fell 2.2% this week, logging its second straight weekly decline.
Brent crude oil futures rose 10 cents to $70.85 per barrel. The international benchmark for oil prices slumped 2% in the previous session and ended the week 1.8 percent lower, for its first weekly loss in five weeks.
· Oil futures edged higher in volatile trade on Monday as rising tensions between the United States and Iran buoyed prices, which earlier touched a one-month low after U.S. President Donald Trump said he may raise tariffs on Chinese goods.
U.S. West Texas Intermediate crude futures settled 31 cents higher at $62.25 per barrel on Monday. WTI hit $60.04 earlier in the session, its lowest since March 29.
Brent crude futures rose 39 cents to $71.24 per barrel, after earlier hitting its lowest since April 2 at $68.79.
Reference: CNBC, Reuters, DailyFX, Bloomberg
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