· The U.S. dollar was modestly lower on Tuesday after Federal Reserve Chair Jerome Powell alluded to the possibility of an interest rate cut in the face of economic risks, including the global trade war.
The U.S. central bank will respond “as appropriate” to trade - and other - headwinds, Powell said in a brief statement included as part of a speech on broader monetary policy issues. Powell said the Fed was “closely monitoring the implications” of the trade dispute that has, since the Fed’s last meeting, disrupted global bond and equity markets and posed risks to U.S. and world economic growth.
The dollar index, which measures the greenback against a basket of six rival currencies, was last 0.09% lower on the day at 97.057.
· “Powell’s comments will be seen as slightly dollar negative but we might not see much of a move today because the greenback already fell yesterday after (St. Louis Federal Reserve President James) Bullard. His comments are not as aggressively dovish as Bullard’s yesterday but he does reiterate the same concerns: trade tensions and low inflation,” said John Doyle, vice president of dealing and trading at Tempus, Inc.
· The pound climbed from a five-month low on Tuesday but concerns about a disorderly departure from the EU meant gains were modest, amid promises from U.S. President Donald Trump of a “phenomenal” post-Brexit trade deal. It was last trading up 0.32% at $1.270.
· The yield on the benchmark 10-year Treasury note rose on Tuesday after sliding to its lowest level in 20 months in the prior session after Federal Reserve Chair Jerome Powell told investors the central bank will try to sustain the expansion.
At around 2:40 p.m. ET, the yield on the benchmark 10-year Treasury note, which moves inversely to price, was higher at around 2.128%, while the yield on the 2-year yield climbed to 1.879%.
· The Federal Reserve will respond “as appropriate” to the risks posed by a global trade war and other recent developments, Fed Chairman Jerome Powell said on Tuesday in remarks that seemed to open the door to the possibility of a rate cut.
In a brief statement included as part of a speech on broader monetary policy issues, Powell said the Fed was “closely monitoring the implications” of a trade dispute that has, since the Fed’s last meeting, disrupted global bond and equity markets and posed risks to U.S. and world economic growth.
The comments also reflect a diminishing faith at the central bank that the Trump administration will resolve its disputes with top trading nations in a way and on a timetable that poses little risk to U.S. economic growth.
· The Trump Administration’s blacklisting of Huawei is punishing a number of U.S. technology companies that provide components to the Chinese networking giant. The latest to publicly acknowledge the problem is chipmaker Skyworks Solutions.
Skyworks lowered its quarterly earnings and revenue forecast on Tuesday, telling investors that it stopped shipping products to Huawei. Shares of Skyworks dropped more than 1% in extended trading and have tumbled 12% since May 15, when President Trump signed an executive order declaring a national emergency because “foreign adversaries are increasingly creating and exploiting vulnerabilities in information and communications technology and services.”
· U.S. President Donald Trump on Tuesday promised Britain a “phenomenal” post-Brexit trade deal, dismissed differences over China’s Huawei and glossed over other disagreements as he heaped praise on the United States’ closest ally.
Feted by Queen Elizabeth on the first day of his state visit to Britain, Trump was effusive about the “special relationship” between the two nations, dispelling concerns he might repeat criticism of Britain and outgoing Prime Minister Theresa May.
· Members of the U.S. Congress, including some of President Donald Trump’s fellow Republicans as well as Democrats, are preparing legislation seeking to block his plan for $8 billion in weapons sales to Saudi Arabia, the United Arab Emirates and Jordan, congressional aides and lawmakers said on Tuesday.
Declaring a national emergency because of tensions with Iran, the Trump administration informed congressional committees on May 24 that it was going ahead with the 22 military deals, circumventing a long-standing precedent for lawmakers to review major weapons sales.
The decision angered members of both parties, who worried that Trump’s decision to blow through the “holds” process would eliminate Congress’ ability to prevent not just Trump but future presidents from selling weapons where they liked.
· The first measures could be introduced within days, congressional aides said.
Chinese President Xi Jinping said the country’s economy is stable, healthy and well placed to meet all risks and challenges, according to a transcript published by the Xinhua news agency.
Xi made the remarks to the TASS Russian News Agency and Rossiyskaya Gazeta newspaper on Tuesday ahead of his state visit to Russia where he will attend a major Russian investor forum in St Petersburg. The transcript of that interview was published by Xinhua on Wednesday.
Xi did not mention China’s trade war with the United States, which escalated last month after Washington and Beijing slapped new tit-for-tat tariffs on each other.
· Activity in Japan’s services sector expanded at a slightly slower pace in May than the previous month as the rate of job creation weakened and businesses turned less optimistic about the future, a survey showed on Wednesday.
The Markit/Nikkei Japan Services Purchasing Managers’ Index (PMI) edged lower to a seasonally adjusted 51.7 in May from 51.8 in April.
The index stayed above the 50 threshold that separates contraction from expansion for the 32nd straight month.
· Oil prices turned positive on Tuesday, tracking a rally in global stock markets, with Brent crude recovering from a four-month low touched earlier in the session.
World stocks rallied after comments from U.S. Federal Reserve Chairman Jerome Powell drove expectations of a cut in interest rates.
Front-month Brent crude futures settled 69 cents higher at $61.97, posting a 1.1% gain on the day. Brent fell as low as $60.21 earlier, its weakest since January.
U.S. West Texas Intermediate crude futures rose 23 cents to $53.48 per barrel, bouncing from a session low at $52.43.
Reference: CNBC, Reuters
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