· The dollar slipped from two-week highs on Tuesday, as optimism about U.S.-China trade negotiations dwindled, even as U.S. President Donald Trump turned his attention to the European Union with threats of additional tariffs.
In afternoon trading, the dollar index .DXY fell 0.21% to 96.709, not far above a three-month low of 95.84 hit last week, as traders priced in aggressive interest rate cuts by the Federal Reserve this year.
The dollar dropped 0.5% to 107.88 Japanese yen JPY=.
Investors will shift focus to U.S. non-farm payrolls on Friday, with economists expecting 160,000 new jobs in June, compared with 75,000 in May.
· JPMorgan’s gauge of global manufacturing fell to its weakest in almost seven years, contracting for the second month in a row, while Morgan Stanley’s surveys showed world manufacturing shrinking for the first time since 2016.
· The euro got a brief boost after a media report said the European Central Bank was in no rush to cut rates at a July policy meeting. The single currency EUR= last traded flat at $1.1290.
Though central bank officials are divided on the timing of the next policy move, market gauges of interest rates have increased the odds of an ECB cut later this month, thanks to a global drop in bond yields.
· The 10-year Treasury yield fell back under 2% on Tuesday as concerns about global economic growth pushed investors toward safer assets. In Europe, the benchmark German bund yield fell to a new record low.
The yield on the benchmark 10-year Treasury note was 6 basis points lower at around 1.977%. The yield’s move back above 2% this month after China and the U.S. agreed to a trade deal ceasefire proved to be short lived. The yield on the 10-year bund fell to -0.367% in afternoon trading in Germany. Bond yields move inversely to their prices.
· Just days after reaching a truce in a U.S.-China trade war, the U.S. Trade Representative’s office (USTR) opened the new front with Europe on Monday in the long-running dispute over mutual claims of subsidies to Airbus and U.S. rival Boeing.
It added extra products worth $4 billion to a list of EU goods worth $21 billion that are eligible to be hit with tariffs after 15 years of argument at the World Trade Organization - alarming industries on both sides of the Atlantic.
The European Union said on Tuesday it was open to talks with Washington in a dispute over aircraft subsidies while preparing retaliation after the United States added olives, Italian cheese and Scotch whisky to a list of goods in line for hefty tariffs.
· President Donald Trump on Tuesday said that he intends to nominate Christopher Waller, the executive vice president at the Federal Reserve Bank of St. Louis, and Judy Shelton, an economic adviser to the president during his 2016 campaign, to the Federal Reserve’s board.
Shelton was earlier speculated to be a pick for the Federal Reserve board. In an interview with CNBC in June, Shelton said that if appointed, she would lower interest rates to 0% in one to two years.
· The European Council on Tuesday officially nominated Christine Lagarde, managing director of the International Monetary Fund, to become the next president of the European Central Bank.
“Lagarde would be expected to lean broadly dovish on monetary policy while pressing fiscal authorities to play a more active role in promoting eurozone growth,” Krishna Guha, head of global policy and central bank strategy at Evercore ISI, said in a note. “Specifically we think she would back what we expect will be one last big dovish play from Draghi in September: an easing package that includes both a 10-15 bp rate cut and a new QE program at around €30bn a month of purchases.”
· Oil prices fell about 3% on Tuesday, even after OPEC and allies including Russia agreed to extend supply cuts until next March, as weak manufacturing data had investors worried that a slowing global economy could dent oil demand.
Brent crude futures fell $2.61, or 4.01%, to $62.45 a barrel. U.S. West Texas Intermediate (WTI) crude futures fell $2.84, or 4.8%, to $56.25 a barrel, after touching their highest in more than five weeks on Monday.
The Organization of the Petroleum Exporting Countries and other producers such as Russia, a group known as OPEC+, agreed on Tuesday to extend oil supply cuts until March 2020 as members overcame differences to try to prop up prices.
Reference: Reuters, CNBC
Thai
Eng