· The dollar struggled on Wednesday, having been nudged off two-week highs as fading optimism over any near-term Sino-U.S. trade deal revived safe-haven demand and drove U.S. yields down.
The dollar index against a basket of six major currencies stood at 96.742 after pulling back from 96.875 scaled on Tuesday, its highest since June 20.
· The pound was steady at $1.2597 after shedding 0.35% the previous day, when it touched a two-week trough of $1.2584.
BoE’s Carney said on Tuesday that a global trade war and a no-deal Brexit were growing risks to Britain’s economy which might need more help to cope with a downturn, prompting investors to increase their bets on central bank easing.
· The euro was little changed at $1.1291 following a volatile session on Tuesday, when it swung between a low of $1.1275 and a high of $1.1322.
The common currency had received a lift after a media report that European Central Bank policymakers are in no rush to cut interest rates at a July policy meeting. But it later slipped after IMF managing director Christine Lagarde, perceived as a policy dove, was nominated as the next ECB president.
· EUR/USD is trading just below 1.1300, little changed. IMF MD Christine Lagarde has been nominated to lead the ECB and may enact a dovish policy. Services PMIs for June are due shortly.
· EURUSD will be eyeing the release of critical US ISM non-manufacturing/services composite for June with an expected reading of 56.0, marginally lower than the previous 56.9 print. Since US economic data has been tending to underperform relative to economists’ expectations, it would not be surprising if the data fell in line with the broader downtrend.
EURUSD TECHNICAL ANALYSIS
If the US ISM data underwhelms, it is possible EURUSD will rise from a selloff in the US Dollar amid speculation that it provides greater impetus for a Fed rate cut. Conversely, a better-than-expected reading may undermine EURUSD and push the Greenback higher since it may temporarily cool the urgency of needing to implement lower rates.
However, it is also possible that an underperformance in the data may fuel risk aversion amid deteriorating growth standards in the US and could cause the Dollar to rise as traders seek liquidity in uncertain times. Either way, it seems highly unlikely EURUSD will retest resistance at 1.1347 anytime soon as fundamental headwinds continue to be supportive of a stronger US Dollar as the demand for havens rise.
· A senior U.S. official told the Commerce Department’s enforcement staff this week that China’s Huawei should still be treated as blacklisted, days after U.S. President Donald Trump sowed confusion with a vow to ease a ban on sales to the firm.
In an email to enforcement staff on Monday that was seen by Reuters, John Sonderman, Deputy Director of the Office of Export Enforcement, in the Commerce Department’s Bureau of Industry and Security (BIS), sought to clarify how agents should approach license requests by firms seeking approval to sell to Huawei.
· The Bank of Japan could maintain current ultra-low interest rates beyond the timeframe it now sets, a board member said on Wednesday in a sign of the central bank’s growing concern over global risks and stubbornly low inflation.
BOJ policymaker Yukitoshi Funo said Japan’s economy is likely to keep expanding moderately, as an expected pick up in overseas demand help exports emerge from the doldrums.
· Japanese Prime Minister Shinzo Abe said on Wednesday that he was not considering raising the sales tax beyond 10% under his administration, and that he saw no such need at least for a decade.
“I’m not thinking about raising it any more under the Abe administration,” he told a debate with other political party leaders ahead of the upper house elections set for later this month.
“I don’t think it will be necessary for 10 years,” he said, when asked about the possibility of a further hike beyond a scheduled rise to 10% from the current 8% in October.
· After the US President Trump expressed his displeasure towards Iran breaching its Uranium stockpiling limit, the diplomatic Chiefs of the EU, France, Germany and Britain urged Iran to reverse its decision to breach a limit on enriched uranium reserves under a 2015 nuclear deal.
The joint statement signed by EU diplomatic Chief Federica Mogherini and the three countries' foreign ministers - France's Jean-Yves Le Drian, Germany's Heiko Maas and Britain's Jeremy Hunt read: "We urge Iran to reverse this step and to refrain from further measures that undermine the nuclear deal."
· Oil prices were steady on Wednesday after a steep fall in the previous session, supported by extended output cuts by OPEC and its allies despite concerns that a slowing global economy could crimp demand.
Brent crude futures LCOc1 for September delivery were trading up 12 cents, or 0.2%, at $62.52 a barrel by 0613 GMT.
U.S. crude futures for August CLc1 were up 16 cents, or 0.3%, at $56.41 a barrel. Both benchmarks fell more than 4% on Tuesday as worries about a slowing global economy.
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: CNBC, Reuters, FX Street, Daily FX
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