· The dollar drifted higher on Monday as investors tempered their expectations for deep U.S. interest rate cuts this month and heightened Middle East tensions supported safe-haven assets.
While currency-market focus will center on global central bank decisions scheduled for the next two weeks, traders are also watching for developments in U.S.-China trade negotiations and Wall Street earnings
The dollar broke above 108 yen to hit its highest since Wednesday, though that was still in the middle of the 107-109 range where it has traded for a month.
The dollar index was barely changed at 97.179 after gaining 0.35% last week.
· “There’s a lot of uncertainty creeping in to the market,” said Nick Twidale, director at Sydney trade financier XChainge.
“I think we’ve seen a bit of safe-haven flows back into the dollar,” he said, adding it could rise further if the Federal Reserve cuts interest rates by only 25 basis points, as expected.
· The euro held near critical chart support around $1.12, a break of which could lead to further losses.
· After weeks of speculation that interest rate cuts and another round of asset purchases are on their way, investors hope Thursday’s European Central Bank meeting will give the clearest signal yet of imminent policy easing, if not the details.
Economists polled by Reuters expect the ECB to change its forward guidance toward easing this week, and cut the deposit rate in September.
Waiting until September to cut rates gives the ECB extra time to deliver a package of easing measures, say analysts. The latest ECB economic forecasts are also due that month and the bank tends to time big changes with these updates.
UBS expects the ECB to announce a 10 bps rate cut in September alongside a tiered deposit rate to alleviate the pressure of negative rates on banks.
· China is considering plans to boost purchase of US soybeans
· White House economic adviser Larry Kudlow will host a meeting with semiconductor and software executives on Monday to discuss the U.S. ban on sales to China’s Huawei Technologies Co Ltd, two sources briefed on the meeting said on Friday.
Treasury Secretary Steven Mnuchin will also attend the White House event, to which chipmakers Intel Corp (INTC.O) and Qualcomm Inc (QCOM.O) have been invited, the people said.
A White House official confirmed the meeting would take place, noting that Google (GOOGL.O) and Micron (MU.O) would attend, but said it had been called to discuss economic matters.
· Oil prices rose on Monday on concerns that Iran’s seizure of a British tanker last week may lead to supply disruptions in the Middle East Gulf, although gains were capped as Libya resumed output at its largest oil field.
Brent crude futures climbed 88 cents, or 1.4%, to $63.35 a barrel by 0706 GMT.
West Texas Intermediate (WTI) crude futures were up 58 cents, or 1%, at $56.21 a barrel.
WTI fell over 7% and Brent fell more than 6% last week.
· “Falling global demand and rising U.S. stockpiles have helped turn oil charts very bearish, but that may not last as tensions remain high in the Persian Gulf,” Edward Moya, senior market analyst at OANDA in New York, said in a note.
· Sentiment in the oil market has shifted dramatically in recent days, with hedge funds, producers and traders all taking a more bearish tack in response to what they see as weakness in worldwide demand.
The oil market has struggled to sustain a rally despite supply restrictions that generally would be considered bullish. U.S. sanctions on Venezuela and Iran have removed more than 1.5 million barrels of daily supply from the market, OPEC extended a supply-cut deal into 2020 and tensions between the United States and Iran are rising.
Even rising tensions in the Strait of Hormuz, where the United States and others are moving to protect tankers against Iran, has produced only modest gains. On Friday, news that Iran had seized a British tanker supported prices - but futures rose less than 1 percent.
The steady rise in U.S. oil output and demand worries from a protracted Sino-U.S. trade war, however, have weighed on demand forecasts. The International Energy Agency recently cut its expectation for global demand through 2019 and 2020 and said it may cut it again if the global economy - and especially China -show further weakness, while Saudi Arabian exports fell to a 1-1/2-year low in May.
· CRUDE OIL TECHNICAL ANALYSIS
Crude oil prices are still probing support at 54.84. A daily close above below this barrier initially sets the stage to challenge the 49.41-50.60 zone. Alternatively, a reversal back above resistance at 58.19 might set open the way to retest the 60.04-84 region anew.
Reference: Reuters, CNBC
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