· The U.S. dollar held near a one-month high on Wednesday amid heightened trade tensions between the United States and China and ahead of the release of Federal Reserve meeting minutes which may provide more clues on why the central bank stood pat on interest rates earlier this month.
At its May 1 meeting, the Federal Open Market Committee kept interest rates steady and signaled little appetite to adjust them any time soon, taking note of strong jobs growth.
Still, the minutes may not add much to what the market has learned from a slew of comments from Fed members this week.
In Hong Kong earlier Wednesday, James Bullard, president of the Federal Reserve Bank of St. Louis, said further weakness in inflation could prompt the Fed to cut rates, even if economic growth maintains its momentum.
Bullard’s comments echoed those made by other Fed members this week, including the Chicago Fed’s Charles Evans, also a voting member of the FOMC.
Against a basket of rivals, the dollar was steady at 98.043 and just shy of a one-month high of 98.134.
Elsewhere, the euro was steady at $1.116 before a speech by European Central Bank chief Mario Draghi in Frankfurt.
Mario Draghi warned against exaggerating the tradeoffs between risk sharing and risk reduction in the euro zone, arguing it has hampered monetary policy transmission.
· Federal Reserve officials remained firmly committed to a “patient” policy stance at their meeting earlier this month, saying rates likely will remain unchanged well into the future.
Minutes from the May 1-2 Federal Open Market Committee meeting also showed that members raised their expectations for full-year economic growth and said that earlier concerns they had about a slowdown had abated. Despite their general optimism, the committee held the line on interest rates, primarily citing a lack of inflation pressures that allow the central bank to watch how events unfold before making any further moves.
For the past several meetings, members had expressed concerns about slowing global growth, the messy Brexit negotiations and the U.S.-China trade impasse.
However, markets are pricing in at least one cut before the end of the year. In addition, President Donald Trump has pushed the Fed to lower rates, saying a cut of as much as a full percentage point would be appropriate.
The minutes, though, pointed to a Fed that feels comfortable both with policy as well as the rate of growth.
· Investors will be monitoring trade developments between the world’s two largest economies, after a reprieve from the U.S. temporarily backing off its blacklisting of Chinese telecommunications giant Huawei caused European markets to rebound slightly Tuesday.
However news has filtered through that similar sanctions could now be placed on a Chinese video surveillance firm, raising concerns that the tech sector will become central to a drawn out trade war.
China is also apparently set to rethink its entire economic relationship with the U.S., according to a report from The South China Morning Post. The report said China is considering dropping purchases of natural gas from the U.S.
· The U.S. government is lobbying South Korea not to use Huawei Technologies Co Ltd products, a South Korean newspaper reported on Thursday, amid a wider push by Washington to get its allies to reject the Chinese tech firm’s goods.
The U.S. Embassy in Seoul did not immediately respond to request for comment. South Korea’s Ministry of Foreign Affairs did not have an immediate comment.
· CNEX, a microchip company backed by Microsoft and Dell, has filed new allegations in a Texas lawsuit accusing Chinese tech giant Huawei and one of its executives of stealing trade secrets.
It’s the latest filing in a suit set to go to trial June 3. CNEX claims that Huawei spent years trying to steal its data storage secrets, while Huawei has countered with its own suit, filed earlier this month, alleging CNEX is the one that’s been engaged in theft of trade secrets. Both companies have denied wrongdoing.
CNEX has alleged that a Huawei deputy chairman, Eric Xu, directed an employee to pose as a potential customer and submit a report on his findings in order to obtain trade secrets for the company’s chip research and development department.
· Japan’s Panasonic said on Thursday it has stopped shipments of certain components to Huawei Technologies to comply with U.S. restrictions on the Chinese company.
The Osaka-based company does not have a major production site for components in the United States, but it said the ban applies to goods having 25% or more of U.S.-originated technologies or materials.
· Back in Europe, U.K. Prime Minister Theresa May sought to break the Brexit deadlock with the main opposition Labour Party and pro-European Union lawmakers, outlining to Members of Parliament her latest deal which includes a vote on whether to hold another referendum if they back her EU Withdrawal Agreement Bill.
However, Labour’s Brexit spokesman suggested the embattled Prime Minister should admit defeat rather than putting the divorce deal back to a fourth vote. Sterling fell broadly as May’s last-ditch plan faced opposition from across the benches and within her own party.
· Oil futures sank on Wednesday as an unexpected build in U.S. crude stockpiles compounded investor worries that a prolonged trade war between Washington and Beijing could dent crude demand.
U.S. West Texas Intermediate crude futures settled $1.71 lower at $61.39, tumbling 2.7 percent to the lowest closing level in more than a week. Brent crude futures fell $1.19, or 1.7%, at $70.99 at barrel.
· U.S. crude inventories swelled by 4.7 million barrels in the latest week to their highest since July 2017, the U.S. Energy Information Administration reported. Analysts polled by Reuters had forecast a decrease of 599,000 barrels as refineries cut output.
Reference: CNBC, Bloomberg, Reuters
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