· The dollar inched lower on Thursday in thin summer trading, as its outlook remained grim after Federal Reserve Chair Jerome Powell’s bleak comments on the U.S. economy, which bolstered expectations of an interest rate cut later this month.
Since the middle of May, the dollar index has fallen 1.6%, with the greenback down 2.6% against the yen. The dollar, however, trimmed losses against the yen and euro earlier on Thursday after data showed U.S. underlying consumer prices rose 0.3% in June, the most in nearly 1-1/2 years, with solid gains in the costs of a range of goods and service.
In another positive economic report, initial weekly jobless claims fell to a seasonally adjusted 209,000 for the week ended July 6, the lowest since April.
The Fed chief gave a second day of testimony to members of Congress on Thursday, and generally reiterated comments he made the previous day. In afternoon trading, the dollar index was slightly lower at 97.06, after earlier falling to a one-week low.
The dollar was flat versus the yen at 108.45 yen, and was likewise little changed against the Swiss franc at 0.9899 franc. The euro, meanwhile, was up 0.1% against the dollar at $1.1256, even as expectations grew that the European Central Bank would loosen policy.
· Treasury yields jumped on Thursday after the release of U.S. inflation data that topped economist expectations along with a bonds sale that saw weak demand.
The benchmark 10-year yield rose to 2.13% while the 2-year rate climbed to trade at 1.182%. Bond yields move inversely to prices.
· U.S. underlying consumer prices increased by the most in nearly 1-1/2 years in June amid solid gains in the costs of a range of goods and services, but will probably not change expectations the Federal Reserve will cut interest rates this month.
The Labor Department said on Thursday its consumer price index excluding the volatile food and energy components rose 0.3% last month. That as the largest increase since January 2018 and followed four straight monthly gains of 0.1%. The so-called core CPI was boosted by strong increases in the prices for apparel, used cars and trucks, as well as household furnishings.
There were also increases in the cost of healthcare and rents. In the 12 months through June, the core CPI climbed 2.1% after advancing 2.0% in May.
The Fed, which has a 2% inflation target, tracks the core personal consumption expenditures (PCE) price index for monetary policy. The core PCE price index increased 1.5 percent year-on-year in May and has undershot its target this year.
· The number of Americans filing applications for unemployment benefits dropped to a three-month low last week, suggesting sustained labor market strength that could help support a slowing economy.
Initial claims for state unemployment benefits declined 13,000 to a seasonally adjusted 209,000 for the week ended July 6, the lowest level since April, the Labor Department said on Thursday. Data for the prior week was revised to show 1,000 more applications received than previously reported.
· U.S. President Donald Trump on Thursday said he’s “not a fan” of cryptocurrencies, and suggested that Facebook may need a banking charter if the company wants to launch Libra.
In a series of Twitter posts, Trump said cryptocurrencies are not money and “Unregulated Crypto Assets can facilitate unlawful behavior, including drug trade and other illegal activity.”
The president added that the U.S. dollar — which he called “the most dominant currency” in the world — is the “only one real currency in the USA.”
· Facebook is facing a growing chorus of doubts about its new Libra cryptocurrency project from authorities around the world, ahead of two congressional hearings on the initiative next week.
On Wednesday, the chair of the Federal Reserve, Jerome Powell, said Libra raised a host of “serious concerns” around “money laundering, consumer protection and financial stability.”
“I just think it cannot go forward without there being broad satisfaction with the way the company has addressed money laundering” and other issues, Mr. Powell said as he testified before the House Financial Services Committee.
Mr. Powell is the latest central banker to express skepticism about Libra, which Facebook announced last month. Central bankers from Britain, France, the European Central Bank, Singapore and China have all voiced concerns. Separately, just over a week ago, five top Democrats on the Financial Services Committee wrote a letter to the social network calling on it to “immediately cease implementation plans” for Libra until lawmaker questions were answered.
· The Los Angeles and Long Beach port complex, the nation’s busiest and the No. 1 for ocean trade with China, handled 5.1%fewer inbound containers of cargo in June, as the trade standoff between Washington and Beijing disrupts global supply chains.
· The euro zone economy faces rising risks stemming from trade tensions, Brexit and Italy, the International Monetary Fund said on Thursday in an annual report, where it also backed the European Central Bank’s (ECB) plans for fresh stimulus.
In the report, its last on the euro zone before the Fund’s managing director Christine Lagarde leaves in November to head the ECB, the IMF said the bank’s plans to keep monetary policy accommodative were “vital” as the currency bloc faces “a prolonged period of anaemic growth and inflation”.
Output growth in the 19-nation currency bloc will slow to 1.3% this year from 1.9% in 2018, the Fund said, rebounding to 1.6% in 2020.
The IMF’s forecasts were slightly better than those released on Wednesday by the European Commission, the EU’s executive arm, which saw euro zone growth at 1.2% this year and 1.4% in 2020.
The IMF also predicted inflation to remain far off the ECB’s close-to-2% target at least until 2022, and forecast a 1.3% rate this year, in line with ECB estimates.
· Oil prices eased on Thursday as OPEC forecast slower demand for its crude next year, but crude futures hovered at near the highest in more than a month as oil rigs in the Gulf of Mexico were evacuated ahead of a storm.
Brent crude futures fell 39 cents to $66.61 a barrel. During the session, they hit their highest since May 30 at $67.65 a barrel. U.S. West Texas Intermediate (WTI) crude futures dipped 23 cents, or 0.4%, to settle at $60.20 a barrel, after hitting their highest since May 23 at $60.94.
· The Organization of the Petroleum Exporting Countries gave its first 2020 forecasts in a monthly report on Thursday, saying the world would need 29.27 million barrels per day (bpd) of crude from its 14 members next year, down 1.34 million bpd from this year.
The forecast points to the return of a surplus despite an OPEC-led pact to restrain supplies, and was seen as a drag on prices.
Reference: CNBC, Reuters
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