· The dollar was flat on Wednesday as growing concerns about the escalating trade dispute between China and the United States prompted investors to raise their expectations of a U.S. rate cut later in the year.
Unlike previous episodes of trade tensions when the dollar benefited from an increase in trade tensions between the world's two biggest economies, U.S. President Donald Trump's latest threat to raise tariffs on Chinese imports have prompted market strategists to focus on the corrosive impact on Washington.
Against a basket of its rivals, the dollar dipped 0.02 percent to 97.61. Market expectations for a rate hike stand at about 80 percent before the end of the year.
Data earlier showed China's trade surplus with the United States, a major irritant for Washington, expanded to $21.01 billion in April from a month ago, a factor that might provoke a hardening stance from U.S. officials.
Focus is on trade talks on Thursday and Friday in Washington, where Chinese Vice Premier Liu will try to salvage a deal that would avoid a sharp increase in tariffs on Chinese goods scheduled to take effect on Friday.
The Chinese yuan in the offshore market edged 0.1 percent lower to 6.8037 and within striking distance of a four-month low hit on Monday.
Elsewhere, the euro was flat at $1.1191, but holding within recent ranges as currency traders were still undecided on the inflationary outlook for the euro zone economy and the latest developments on the trade war front.
The pound fell for a third day, edging down half a percent to $1.3006 on signs that talks between Britain's government and the main opposition Labour Party to break the Brexit deadlock may soon collapse.
· President Donald Trump said Wednesday that China "just informed" the White House that its vice premier will lead a delegation "coming to the U.S. to make a deal" on trade.
The president's declaration followed a tweet a few minutes earlier, which proclaimed why Trump believes China backed away from the negotiating table. He said China's "attempted renegotiation" is on the "sincere" hope that, if a Democrat is elected president in the 2020 election, the Chinese will "continue to ripoff the United States ... for years to come."
· China has promised to take "necessary countermeasures" against the U.S. if Washington follows through on its threat to increase tariffs Friday on Chinese goods.
China's Commerce Ministry said Wednesday that Beijing will retaliate if U.S. tariffs on $200 billion of Chinese goods are hiked to 25% from 10% as threatened by President Donald Trump on Sunday.
· U.S. President Donald Trump said Wednesday that China "broke the deal" in the ongoing U.S.-China trade talks.
Speaking at a rally in Florida, the president attributed his recent threat of increased tariffs to Beijing's negotiating position.
"By the way, you see the tariffs we're doing? Because they broke the deal. They broke the deal," Trump said. "So they're flying in, the vice premier tomorrow is flying in — good man — but they broke the deal. They can't do that, so they'll be paying."
· President Donald Trump says China wants a deal, but Wall Street is not totally convinced there will be one.
Ed Keon, chief investment strategist at QMA, said the situation remains uncertain. "The odds of something going wrong are much higher today than they were last Friday, when there was pretty much consensus that deal was going to be done and we would have an announcement," he said.
Keon said the market had believed a deal was coming this week, based on comments from U.S. officials, so when Trump first tweeted on the weekend that he could increase tariffs on Chinese goods, it was a surprise.
· President Donald Trump on Wednesday ordered new sanctions on Iran, this time targeting the Islamic Republic’s export revenues from its industrial metals sector, and vowed to keep squeezing Tehran unless it “fundamentally alters” its policies.
· The PM has rejected calls to quit over her handling of Brexit, saying it is "not an issue about me".
Theresa May was replying to Tory Brexiteer Andrea Jenkyns, who said she had "failed to deliver on her promises" and had lost public trust.
Calls have been growing for the prime minister to name an exit date.
The PM's spokesman said she had already promised to leave after delivering the first stage of Brexit and was sticking to that "generous and bold offer".
· Theresa May has told senior Tories she will make a fourth attempt to break the Westminster deadlock on Brexit before European elections take place on May 23, as she tries to head off growing demands that she quit.
But the prime minister has also promised to meet the executive of the 1922 committee of backbench Conservative MPs next week to discuss a timetable for her departure. “She’s living from day to day,” said one minister.
Brandon Lewis, the Conservative chairman, warned a sullen meeting of Tory MPs on Wednesday night to expect the worst in the European Parliament elections. Downing Street fears that the results will lead to a clamour for Mrs May to step down.
· Britain’s economy will be around 3 percent poorer over the long term if it leaves the European Union and retains a customs union with the bloc, the option favored by the opposition Labour Party, academic forecasters predicted on Thursday.
The National Institute of Economic and Social Research (NIESR) said the long-run loss after 10 years, compared to staying in the EU, would be equivalent to around 800 pounds ($1,040) per person per year.
· Oil futures rose on Wednesday, boosted by a surprise drawdown in U.S. crude stockpiles, but an escalating U.S.-Chinese trade fight limited oil's gains as investors worried about the global outlook for energy demand.
U.S. West Texas Intermediate crude futures settled 72 cents higher at $62.12 per barrel, posting a 1.2% gain. Brent crude oil futures rose 49 cents, or 0.7%, to $70.37 per barrel on Wednesday.
U.S. crude inventories fell by 4 million barrels in the week to May 3, the Energy Information Administration said. Analysts had expected an increase of 1.2 million barrels.
Reference: CNBC, Reuters, BBC, Financial Times
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