· The dollar fell for a third consecutive day on Friday as stronger-than-expected U.S. inflation data failed to shake convictions that the Federal Reserve will start cutting interest rates at a policy meeting later this month.
Against a basket of other currencies, the dollar fell 0.1% to 96.94 and was on track for its biggest weekly drop in three weeks.
Other currencies which benefited from a weaker dollar were in markets whose central banks signaled a relatively confident outlook to interest rates.
The euro trimmed earlier gains after European Central Bank Governing Council member Ignazio Visco said on Friday the ECB will need to adopt further expansionary measures if the euro zone economy does not pick up and will consider its options “in the coming weeks”.
The single currency was flat at $1.1258, below an intraday high of $1.1275 in early London trading.
· Market attention will be focused on comments by Chicago Fed President Charles Evans later on Friday and New York Fed President John Williams on Monday which will provide a chance to gauge how dovish the U.S. central bank will be.
· “If these Fed officials are not as dovish as (Federal Reserve Chair Jerome) Powell, and if the New York Fed’s manufacturing survey on Monday proves stronger than forecast, they could show that the dollar weakening in response to Powell’s congressional testimony was overdone,” said Masafumi Yamamoto, chief forex strategist at Mizuho Securities.
· The yield on 10-year Treasury note hit a one-month high on Friday, on pace to post its biggest weekly gain since April after recent data showed hotter-than-expected inflation.
The rate on the benchmark Treasury note, which moves inversely to price, rose to 2.1310%, the highest since June 11. The yield on the 30-year Treasury bond was also higher at around 2.6535%.
The U.S. consumer price index — a widely followed measure of inflation — rose more than expected last month, with the core CPI posting its biggest gain in one and a half years.
The Labor Department said on Friday its producer price index for final demand edged up 0.1% last month after a similar gain in May. Economists polled by Reuters had forecast the PPI unchanged in June.
· Wall Street’s Fed frenzy might not turn out how investors expect.
That’s at least according to Michael Schumacher, global head of rate strategy and managing director at Wells Fargo Securities, who said investors may find themselves disappointed by the Fed’s next move.
Many on the Street expect the U.S. central bank to slash its benchmark interest rate at the next Federal Open Market Committee meeting in late July in response to weakening economic data domestically and around the globe. The CME’s FedWatch tool currently shows traders pricing in a 100% chance of a July cut.
But what the stock market is pricing in with regards to Fed policy might be too aggressive, Schumacher told CNBC’s “Futures Now” on Thursday.
“We think they’ll come in and do two moves, so 50 basis points total [worth of cuts]. The market’s priced for something like 65 or 70basis points,” Schumacher said. “So, in our view, at least at Wells Fargo, we think the Fed is, in some strange way, going to disappoint the market by not [cutting] as much as it already anticipates.”
· Chinese tech company Huawei plans to lay off hundreds of employees in the United States as it struggles with a blacklist imposed by the Trump administration over national security concerns, The Wall Street Journal reported, citing people familiar with the matter.
The layoffs are expected to hit Huawei’s U.S. development subsidiary Futurewei, according to the Journal. Futurewei employs 850people in research labs throughout the U.S., including Texas, California and Washington state. Overall, Huawei has about 1,500employs in the U.S. who mainly sell equipment to rural wireless carriers.
Although the exact number of layoffs was unclear, a person familiar with the matter told the Journal that hundreds of people were expected to lose their jobs.
Huawei could not be immediately reached for comment.
· Taiwan is stepping into its election season with the opposition Kuomintang (KMT), or Nationalist Party, currently holding its presidential primary ahead of general elections expected in January 2020.
The winner of the KMT race will be pit against incumbent President Tsai Ing-wen, who recently rode on the tailwind from massive protests in Hong Kong to win her Democratic Progressive Party’s (DPP) primary. The victor of the opposition race is expected to be known by early next week.
China prefers the KMT, which avoids talk of going it alone and stresses economic ties with the mainland, from which KMT troops fled in 1949 after defeat in the Chinese Civil War
Front-runners in the KMT primary are populist Kaohsiung Mayor Han Kuo-yu and Terry Gou, the founder of electronics manufacturer Foxconn, also known as Hon Hai Precision Industry.
· Oil prices posted strong weekly gains on Friday as U.S. Gulf of Mexico crude output was halved by disruptions caused by a tropical storm, but concerns over a global crude surplus in the months ahead limited gains.
West Texas Intermediate futures rose nearly 5% this week while Brent climbed more than 4%. On Friday, however, U.S. crude gained just 1 cent to settle at $60.21 per barrel while Brent gained 25 cents to trade at $66.77 per barrel.
Tropical Storm Barry, which is expected to become a hurricane just before making landfall this weekend, boosted crude futures as oil companies in the Gulf of Mexico sliced production.
Companies cut more than 1 million barrels per day (bpd) of output, or 53% of the region’s production, as the storm headed for possible landfall on the Louisiana coast on Saturday.
· The United States has granted a visa to Iranian Foreign Minister Mohammad Javad Zarif to attend a U.N. meeting in New York this week, two sources familiar with the matter said on Sunday, saying Secretary of State Mike Pompeo had approved the decision.
Had Pompeo not approved giving Zarif, Iran’s top diplomat and nuclear negotiator, a U.S. visa it could have been a signal that the United States was trying to further isolate the Islamic Republic.
Reference: CNBC, Reuters
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