· The dollar was little changed on Thursday, on track to post a fourth straight month of gains, as the trade stand-off between China and the United States prompted traders to put money into perceived safe currencies including the greenback.
Safe-haven demand lifted the dollar to a 2-year high against a basket of currencies last week. Appetite for the greenback was somewhat curbed on Thursday as Wall Street stabilized following steep losses due to the trade worries and U.S. bond yields briefly rose before resuming their recent fall.
The euro and sterling held above key support levels at $1.11 and $1.26, respectively, also restraining the greenback’s momentum, analysts said.
“With the U.S.-China trade situation, people don’t want to do anything until there’s a resolution,” Joseph Trevisani, senior analyst at FX Street, said of this week’s light volume and tight trading ranges.
In late U.S. trading, an index that tracks the dollar against six major currencies was down -0.01% at 98.151. It reached 98.371 a week ago, its strongest since May 2017.
The euro was up 0.04% at $1.1135, within striking distance of $1.11055 hit a week ago, which was a two-year low.
Sterling was poised for the biggest monthly drop against the dollar in a year as the imminent departure of Theresa May as prime minister deepened fears about a chaotic exit for Britain from the European Union.
On Thursday, the pound was 0.13% lower at $1.261.
· Long-term U.S. government debt yields reversed an early climb Thursday and fell into the red in afternoon trading as investor angst over the state of the global economy rekindled demand for safer assets.
At around 2:47 p.m. ET, the yield on the benchmark 10-year Treasury note, which moves inversely to price, was lower at around 2.225%, off a 20-month low of 2.21% hit on Wednesday. A portion of the yield curve remained inverted as the yield on the 3-month Treasury bill held rose to 2.372%. The 2-year rate slipped to 2.067%.
· China’s manufacturing activity contracted more than expected for in the month of May amid a bitter trade war with the U.S.
The official manufacturing Purchasing Managers’ Index (PMI) for May came in at 49.4, lower than the 49.9 economists polled by Reuters had forecast. April’s reading was 50.1.
PMI readings above 50 indicate expansion, while those below that signal contraction.
· Vice President Mike Pence is planning a speech around the 30th anniversary of the Tiananmen Square massacre, according to two sources familiar with the matter.
The remarks are expected to be a censure of China’s religious freedom and human rights record from one of the Trump administration’s highest-ranking China hawks. They are set to come amid rising trade tensions between the world’s two largest economies.
A White House official confirmed a Pence speech is in the works – potentially in mid-June, following the anniversary – but declined to comment on its contents.
· The U.S. will impose a 5% tariff on all Mexican imports from June 10 — and more duties will be added in the coming months if Mexico does not take action “to dramatically reduce or eliminate the number of illegal aliens” crossing into the U.S., the White House said Thursday.
Mexico was the second-biggest importer of goods into the United States in 2018, according to the Office of the U.S. Trade Representative.
The United States imported $346.5 billion of goods in 2018, an increase of 10.3 percent over the year prior. The 2018 total accounted for 13.6 percent of overall U.S. imports that year.
· South Korea’s central bank kept interest rates unchanged for a fourth straight meeting on Friday, although pressure to ease monetary policy is growing as global trade pressures drag on the export-reliant economy.
The Bank of Korea’s Monetary Policy Board voted to hold the benchmark interest rate at 1.75%, as expected by 20 of 21 economists in a Reuters poll.
· North Korea executed, its special envoy to the United States, and foreign ministry officials who carried out working-level negotiations for the second U.S.-North Korea summit in February, holding them responsible for its collapse, a South Korean newspaper reported on Friday.
Kim Yong Chol, a senior official who had been U.S. Secretary of State Mike Pompeo’s counterpart in the run-up to the summit between U.S. President Donald Trump and North Korean leader Kim Jong Un in Hanoi, is also said to have been subjected to forced labor and ideological education, the Chosun Ilbo reported.
The North Korean leader is believed to be carrying out a massive purge to divert attention away from internal turmoil and discontent, the newspaper said.
· Oil prices fell sharply on Thursday on a smaller-than-expected decline in U.S. crude inventories and fears of a global economic slowdown due to the U.S.-China trade war.
Brent futures fell $2.88, or 3.9%, to $66.54 a barrel. U.S. West Texas Intermediate (WTI) crude settles down 3.8%, at $56.59 per barrel.
If the contracts close at their current levels, it would be the lowest settle for Brent since March 22 and WTI since March 12.
· The U.S. Energy Information Administration (EIA) said crude stockpiles fell nearly 300,000 barrels last week, less than the 900,000-barrel decline analysts forecast in a Reuters poll and well below the 5.3 million-barrel drawdown the American Petroleum Institute (API) reported late Wednesday.
The decline last week reduced crude stocks from their highest since July 2017 seen the previous week, but at 476.5 million barrels, they were still about 5% above the five-year average for this time of year.
· “The oil inventories report has added to the bearish sentiment prevailing in today’s trading session,” said Abhishek Kumar, head of analytics at Interfax Energy in London, noting “Demand-side concerns emerging from the ongoing U.S.-China trade war are expected to remain the key driver weighing on oil prices.”
· The oil industry is watching the progress of a Chinese tanker that is loaded with Iranian crude, potentially in violation of U.S. sanctions.
Two websites that tracks oil vessels, documented the first departure of a supertanker carrying crude oil out of Iran since the Trump administration ended oil waivers earlier this month.
The U.S. State Department warns the U.S. government will enforce its sanctions on Iranian oil.
Reference: CNBC
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