The dollar index hit a two-week high of 97.603 on Monday but was last flat on the day at 97.573. The euro was 0.07% higher at $1.122 as investors awaited policymakers speeches at the European Central Bank meeting in Sintra, Portugal, and Tuesday’s euro zone inflation data.
Broader currency markets were quiet, as traders hesitated to put on large positions before the Fed’s two-day meeting, a meeting of European Central Bank policymakers in Portugal and the Bank of England’s interest rate decision on Thursday.
· Expectations of a rate cut at the Fed’s June 18-19 meeting have fallen to a probability of 20.8%, according to CME Group’s FedWatch tool. But bets for monetary easing at its July meeting remain elevated, with markets pricing in a 67.9% chance of a 25 basis point cut.
· Sterling slid as low as $1.254, its weakest since January, heading for a 2019 low. Investors worry Boris Johnson, the front-runner to replace Prime Minister Theresa May, could put Britain on a path towards a no-deal Brexit
· The U.S. Federal Reserve, facing fresh demands by President Donald Trump to cut interest rates, is expected to leave borrowing costs unchanged at a policy meeting this week but possibly lay the groundwork for a rate cut later this year.
Analysts expect the “dot plot” of year-end forecasts for the Fed’s benchmark overnight lending rate - the federal funds rate - will show a growing number of policymakers are open to cutting rates in the coming months, though nowhere near as aggressively as investors expect or Trump wants.
The Fed is also widely, though not universally, expected to remove a pledge to be “patient” in taking future action on rates, opening the door to a possible cut at its coming policy meetings.
The federal funds rate is currently set in a range of 2.25% to 2.50%.
· President Donald Trump is ready to proceed with tariffs on the remaining $300 billion in Chinese goods in the absence of a trade deal, according to U.S. Commerce Secretary Wilbur Ross.
Speaking to CNBC’s Phil LeBeau at the Paris Airshow Monday, Ross said enforcement would be the most important element of any potential deal between the world’s two largest economies.
“We will eventually make a deal, but if we don’t, the president is perfectly happy with continuing the tariff movements that we’ve already announced, as well as imposing the new ones that he has temporarily suspended,” Ross said.
Ross played down the prospect of an agreement being reached at the G-20 meeting in Osaka on June 28-29, where Trump and Chinese President Xi Jinping are expected to be in attendance.
He said the G-20 was not a place “where you’re going to negotiate a 2,500 page agreement,” adding that “there may be an agreement on the path forward, but that’s about as far as we can expect it to go.”
Ross also indicated that Washington was prepared to deploy tariffs on auto imports in order to pressure foreign carmarkers into manufacturing on U.S. soil.
Ross added that the U.S. president was “giving very serious thought” to putting tariffs an all auto imports, including those from the European Union.
· This year’s holiday season could be tighter for many Americans if the U.S. government imposes tariffs on another $300 billion worth of Chinese imports - because that will include tech products, game consoles, toys, cribs, ornaments and Santa hats.
The tariffs would add 25% to the import cost of these and many other consumer items just as retail outlets throughout the world’s largest economy begin to gear up for the peak end-of-year shopping season.
Consumers have been largely shielded until now from the direct impact of the trade war between China and the United States as the administration of President Donald Trump has focused previous rounds of tariffs on imports sold to manufacturers rather consumers.
· A wide range of U.S. companies told a hearing in Washington on Monday that they have few alternatives other than China for producing clothing, electronics and other consumer goods as the Trump administration prepares new tariffs on remaining U.S.-China trade.
The comments came on the first of seven days of testimony on President Donald Trump’s plan to hit another $300 billion worth of Chinese imports with duties of 25%.
Sourcing from other countries will raise costs, in many cases more than the 25% tariffs, some witnesses told a panel of officials from the U.S. Trade Representative’s office, the Commerce Department, State Department and other federal agencies.
· The Pentagon is preparing to send more troops to the Middle East amid increasing tensions between the United States and Iran.
“I have authorized approximately 1,000 additional troops for defensive purposes to address air, naval, and ground-based threats in the Middle East,” wrote acting Secretary of Defense Pat Shanahan in a statement Monday.
The latest revelation comes on the heels of last week’s attacks on two oil tankers in the Gulf of Oman.
· Oil prices fell more than 1% on Monday after more poor Chinese economic figures fanned fears of lower worldwide oil demand.
Brent crude futures lost $1.07 to settle at $60.94 a barrel, a 1.73 percent loss. U.S. West Texas Intermediate (WTI) crude futures fell 58 cents to settle at $51.93 a barrel, a 1.10 percent loss.
Prices have fallen around 20% since a 2019 high reached in April, in part due to concerns about the U.S.-China trade war and disappointing economic data.
Reference: CNBC, Reuters
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