The Mexican peso rose 2% to 19.2275 pesos per dollar after trading resumed for the first time after Mexico agreed on Friday to expand along the entire border a program that sends migrants seeking asylum in the United States to Mexico.
· Against the safe-haven yen, the dollar gained 0.25% to 108.475 yen.
· Against a basket of six peers, the dollar index rose 0.2% to 96.750, recovering slightly after ending with a 1.2% loss last week, its worst weekly performance since the week of Feb. 16, 2018.
· Elsewhere, the Chinese yuan was last down about 0.3% at 6.9336 per dollar in onshore trade after briefly brushing its lowest since late November in the wake of the weak import data.
· The Australian dollar slipped 0.4% to $0.6973, giving up some of last week’s gains, when it rose 0.9%.
· The euro dipped nearly 0.2% to $1.1313, retreating from an 11-week high of $1.1348 touched on Frida
· There are no signs that the U.S. economy may be heading into a recession, according to Treasury Secretary Steven Mnuchin.
“U.S. growth it still really the bright spot of the world,” Mnuchin told CNBC’s Nancy Hungerford.
“As it relates to the employment numbers, I wouldn’t focus on any one number: There’s plenty of volatility in these numbers,” he added. “We still see the growth in the U.S. as really quite strong.”
· China said on Monday its overall trade surplus was $41.65 billion last month, significantly more than expected as the trade impasse between Washington and Beijing drags on.
Economists polled by Reuters had expected China to post an overall trade surplus of $20.5 billion in May.
The larger trade surplus came as the country’s dollar-denominated exports surprisingly increased last month, while imports came in worse than expected. China’s General Administration of Customs said on Monday that exports in May inched up 1.1% year-on-year, while imports fell 8.5% during the same period.
Trump threatened that more levies could come — a point reiterated by U.S. Treasury Secretary Steven Mnuchin, who told CNBC the president “is perfectly happy” to increase tariffs on China if his expected meeting with Chinese President Xi Jinping doesn’t go well. Trump said that he’s expected to meet Xi later this month.
Many analysts expect China to experience a larger economic hit from its ongoing trade war, with data in recent months showing signs of slowing activity. The International Monetary Fund and major banks such as Morgan Stanley recently lowered their growth forecasts for China citing trade concerns.
· Chinese exports of rare earths fell in May amid Beijing’s threat to stop supplying the U.S. with those minerals used to make a wide range of consumer electronics.
Data released on Monday by Chinese customs showed that China exported 3,639.5 metric tons of rare earths last month, down from4,329 metric tons in April. That came as total exports from China in May unexpectedly rose 1.1%, while imports fell by a surprise8.5% — taking the country’s overall trade surplus significantly higher to $41.65 billion.
In return, Beijing raised tariffs on $60 billion of American goods and threatened to stop exporting rare earths to the U.S.
China is the world’s leading producer of rare earths, which are a group of 17 minerals produced in fairly scarce quantities. They are commonly used in everything from car motors and electronics to oil refining and clean diesel to many major weapons systems the U.S. relies on for national security, including lasers and radar.
The country produced 120,000 metric tons or 70% of total rare earths in 2018, according to the United States Geological Survey. The U.S. pales in comparison, mining 15,000 metric tons of rare earths in 2018.
Experts are split on whether Beijing’s rare earths threat could be a game changer in the ongoing trade war.
Some argue that the U.S. is more reliant on Chinese supply than what current trade data suggest, so China limiting rare earths exports could hurt American industries such as defense and autos. However, others say the American manufacturing sector is not a big consumer of rare earths, so Beijing’s ability to use those minerals as a leverage is limit
· Chinese President Xi Jinping has described Russian President Vladimir Putin as his “best friend” during a three day state-visit to Russia.
“In the past six years, we have met nearly 30 times. Russia is the country that I have visited the most times, and President Putin is my best friend and colleague,” Xi said at a press conference Wednesday afternoon.
Russia and China appear to be intent on strengthening their alliance and fostering deeper cooperation in the face of increased political and economic hostility from the U.S. That bid to strengthen bilateral ties continues this week with Xi visiting the country for top-level talks with Putin.
· The European Union should allow Italy to cut tax and invest in the green economy to boost the country’s economy, Deputy Prime Minister Luigi Di Maio said on Monday.
Di Maio, who heads the ruling 5 Star party, will meet his co-deputy PM and League party leader Matteo Salvini as well as Prime Minister Giuseppe Conte later on Monday to discuss the threat of EU action against Italy for excessive debt.
Di Maio said he expected the trio to agree on minimum salary, tax cuts and curbing privileges for politicians and policymakers.
· If trade tensions between the U.S. and China continue to escalate, that may have a “direct and very negative impact all over the world, especially Europe and the Eurozone, ” according to French Finance and Economy Minister Bruno Le Maire.
In fact, Le Maire said the tariffs battle, which kicked off last year, has already reached beyond the world’s two largest economies. Speaking with CNBC over the weekend at the G-20 Finance Ministers Meeting in Fukuoka, Japan, he said Europe is already performing worse than it otherwise would because of the ongoing U.S.-China trade war.
“I want to be very clear, a trade war would mean an economic crisis all over the world, and especially in Europe,” he told CNBC’s Nancy Hungerford.
Some have suggested that Washington’s recent campaign against Huawei is part of an attempt to gain leverage on its trade talks with Beijing. For his part, Le Maire said that governments should not be mixing trade and non-trade issues.
“We need to make a clear difference between ... sovereignty, key technologies on the one side, and trade on the other side,” he said.
“Trade tariffs do not have anything to do with the technologies. We want to have a fair trade,” he added. “We want to build a trade that will be more efficient that will feed growth in the future and for that we have to avoid hitting countries with new tariffs and entering into a trade war.”
Mnuchin, meanwhile, defended Trump’s approach, and when asked if trade could again be used as a weapon in non-trade disputes, said, “I think it’s very important that we have all these tools, that we use them.”
· The probability of the U.K. leaving the European Union without a deal is “very small,” according to Philip Hammond, Britain’s chancellor of the exchequer.
Analysts and investors have raised the probability of a no-deal Brexit since Prime Minister Theresa May announced last month that she would step down. May officially resigned as leader of the Conservative Party on Friday, but remains prime minister until her party elects a new chief.
· Australia is calling for calm as the trade war between Washington and Beijing rages on, appearing like there’s no end in sight.
“From Australia’s perspective, given that China is our number one trading partner, and the United States is our number one investor, we want cool heads to prevail, ” said Australian Treasurer Josh Frydenberg.
“But overall,” he added, “the tensions are weighing on the global economic outlook.”
· BOJ Governor Kuroda:
- Japan's economy doesn't need extra easing now but the central bank still has room for "big stimulus".
- Stimulus needs to be strengthened if price momentum is lost, BOJ would consider ways to reduce side effects if extra support is needed
· Oil prices rose on Monday after Saudi Arabia said producer club OPEC and Russia should restrict supplies to current levels, while Washington’s withdrawal of a tariff threat against Mexico removed a cloud over the global economy.
However, traders said concerns about the health of the global economy and the impact on fuel demand were still weighing on oil market sentiment.
Front-month Brent crude futures were at $63.61 at 0645 GMT, 32 cents, or 0.5%, above Friday’s close.
U.S. West Texas Intermediate (WTI) crude futures were at $54.32 per barrel, 33 cents, or 0.6%.
“Brent futures continue rising ... after the Saudi Arabian Energy Minister expressed confidence that OPEC+ producers will prolong their output cuts program through the second half of 2019,” said Han Tan, analyst at futures brokerage FXTM.
Reference: Reuters, CNBC, Daily FX
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