· The dollar edged up from a three-month low on Wednesday, as investors dialed back expectations for aggressive U.S. rate cuts but underlying conviction the Federal Reserve will need to ease policy soon capped greenback gains.
Fed Chairman Jerome Powell on Tuesday stressed the central bank’s independence from U.S. President Donald Trump, who is pushing for significant rate cuts.
St. Louis Fed President James Bullard, seen as one of the most dovish U.S. central bankers, surprised some investors by saying a 50 basis-point cut in rates “would be overdone.”
· Traders still expect the Fed, the Reserve Bank of New Zealand, and other central banks to cut rates in coming months as the outlook for global growth dims, which will be a major driver of currency moves in coming months.
· The dollar index against a basket of currencies stood at 96.289 on Wednesday, just above a three-month low of 95.843 touched on Tuesday.
The U.S. currency rose 0.25% to 107.44 yen, rebounding from 106.77 yen, its lowest level since its flash crash in early January.
· Interest rate futures are now pricing in a 33% chance of a 50 basis point cut at the Fed’s July meeting, down from 38% earlier, while a cut of at least 25 basis points is seen as certain, according to the CME Group’s FedWatch Tool.
Traders are also eyeing a meeting between Trump and Chinese President Xi Jinping at a G20 summit over the weekend, but expectations are low for a breakthrough to end a year-long trade war between the world’s two largest economies.
· The British pound slipped 0.23% to $1.2670 before the Bank of England publishes its closely-watched quarterly inflation forecasts later on Wednesday.
The BoE has said rates would need to rise in a gradual fashion as long as Britain avoids a no-deal exit from the European Union.
The euro was little changed at $1.1356, pulling back slightly from a three-month high of $1.1412.
· DXY has regained some buying interest after bottoming out in the 95.80 region, coincident with late February lows. Further south emerges the next support at 95.74, or March low.
The ongoing recovery should ideally retake the 96.60 region, where sit the critical 200-day SMA and the multi-month resistance line.
If/when this area is cleared, the immediate target will be monthly peaks in the 97.75/80 band.
· Stocks are likely to see a temporary relief rally and bonds could sell off if there is a ‘ceasefire’ declared in the trade wars by the U.S. and China this weekend, but the damage to the global economy could continue until a tariff-ending deal is struck.
The meeting, at the G-20 summit, is so important that market pros broadly see it as an event that could affect the course of markets for the rest of the year; impact the trajectory of global economic growth, and help determine when and what actions the Federal Reserve and other central banks might take.
“You just amp up the odds even greater that we’re going to have a global recession, if there’s no detente between the U.S. and China. With respect to G-20, I don’t think there will be anything negative, and it will probably be a ‘kumbaya’ moment,” said Peter Boockvar, chief investment strategist at Bleakley Advisory Group.
· The United States hopes to re-launch trade talks with China after President Donald Trump and President Xi Jinping meet in Japan on Saturday, but Washington will not accept any conditions around the U.S. use of tariffs in the dispute, a senior administration official said on Tuesday.
· More than 300 companies are talking to government officials in Washington this month about how detrimental the trade war between the U.S. and China has been and will be to their business.
Testifying in front of the Office of the U.S. Trade Representative, major U.S. companies including Best Buy, HP and Hallmark Cards are voicing concerns about how the additional tariffs that President Donald Trump threatened to slap on China would impact their businesses and cause them to lose business to foreign competitors.
· Australian Prime Minister Scott Morrison said on Wednesday that China should reform its economy to end a trade war with the United States that is damaging the global economy, comments that could strain ties with the country’s largest trading partner.
· The United States is in behind-the-scenes talks with North Korea over a possible third summit and has proposed working-level negotiations that have been stalled since the second such meeting in February, South Korean President Moon Jae-in said on Wednesday.
· Japan will hold an election for the upper house on July 21, the government said on Wednesday, effectively kicking off campaigning for half the seats in the less powerful of parliament’s two chambers.
Expectations had simmered that Prime Minister Shinzo Abe would also call a snap election for the more powerful lower house, but the Japanese leader has said he was not considering such a move.
Abe appears to hope a successful performance as host of the June 28-29 Group of 20 summit in Osaka, western Japan, will bolster his ruling bloc’s results.
· Chinese home buyers last year ponied up much less cash in the U.S. as the trade war continues to escalate between the world’s two largest economies.
As President Donald Trump and President Xi Jinping prepare to meet this week, there are worries that decline in spending could extend further.
U.S. property sales to Chinese buyers saw a 4% drop from 2017 to 2018, according to numbers provided by Juwai.com, China’s largest foreign property sales site.
· Oil prices rose more than 1% on Wednesday to their highest in nearly a month as industry data showed U.S. crude stockpiles fell more than expected, underpinning a market already buoyed by worries over a potential U.S.-Iran conflict.
Front-month Brent crude futures, international benchmark for oil, were up 1.3% at $65.91 by 0341 GMT. They earlier touched their highest since May 31 at $66 a barrel.
U.S. West Texas Intermediate (WTI) crude futures were at $58.98 per barrel, up 1.8% from their last settlement. WTI earlier hit its strongest level since May 30 at $59.03 a barrel.
Analysts said the gains were mainly driven by American Petroleum Institute (API) data showing a fall in U.S. crude inventories.
U.S. crude stockpiles fell by 7.5 million barrels in the week ended June 21 to 474.5 million, compared with analyst expectations for a decline of 2.5 million barrels, the data showed. Crude stocks at U.S. delivery hub Cushing, Oklahoma, fell by 1.3 million barrels.
Reference: CNBC, Reuters, FX Street
Thai
Eng