· The dollar held near a two-month high on Monday ahead of what is expected to be the first U.S. interest rate cut since the financial crisis, while the rising risk that Britain will exit the European Union without a deal knocked the pound to a 28-month low.
The Federal Reserve is forecast to cut interest rates on Wednesday by 25 basis points. The move would be a so-called insurance cut to protect the U.S. economy from global uncertainties and trade pressures, in contrast to cuts by countries facing more imminent risks.
President Donald Trump on Monday morning once again targeted the Fed, writing on Twitter that a small interest rate cut by the central bank would not be sufficient and accusing U.S. monetary policymakers of acting more cautiously than China and Europe.
The dollar index was up 0.08% to 98.08.
Better-than-expected U.S. GDP data published on Friday had buoyed the index against rivals; the greenback retained those gains on Monday, hitting a fresh two-month top. But the move was relatively muted as traders refrained from placing big bets ahead of the Fed decision.
The euro hovered at $1.1139, effectively flat on the day and not far from Thursday’s bottom of $1.110, its lowest since May 2017.
Elsewhere on Monday, the pound fell 1.3% to a 28-month low as more investors scrambled to factor in the growing risk of a no-deal Brexit and the chance that new British Prime Minister Boris Johnson will call an early election.
· U.S. government debt prices rose on Monday as traders wait to hear from the Federal Reserve later this week.
The yield on the benchmark 10-year Treasury note, which moves inversely to price, was lower at 2.0505% while the yield on the 30-year Treasury bond fell to 2.5763%.
Traders are bracing for a potential cut in interest rates for the first time in since the financial crisis. The U.S. Federal Reserve meets Tuesday and will announce its latest rate decision on Wednesday.
· Treasury Secretary Steven Mnuchin, and U.S. Trade Representative Robert Lighthizer are set resume trade negotiations. It marks their first official in-person meeting with the Chinese delegation since the G-20truce.
The two-day meeting is set to take place in Shanghai on Tuesday after President Donald Trump and Chinese leader Xi Jinping reached a ceasefire last month. However neither side is showing any sense of urgency for a deal.
· Worries about the U.S.-China trade war are running high during the current U.S. quarterly reporting season, with companies as diverse as Juniper Networks and O’Reilly Automotive bemoaning the consequences but saying they are finding ways to weather the storm.
Trade negotiations shift to Shanghai on Tuesday, with stock market investors sensitive to fallout from the year-long conflict and any signs that it could escalate.
Tariffs were mentioned in about a third of conference calls held by S&P 500 companies reporting their quarterly results through July 26, according to FactSet. The 71 firms flagging tariffs were up from the 50companies discussing tariffs in the same time frame in the first-quarter season, but less than the 99 a year ago when tariffs were an emerging issue for U.S. corporations.
· Many of those corporations outlined to investors their plans to minimize the impact of the trade war, which has added to uncertainty as they struggle with a sluggish global economy, including lackluster economies in Europe and Japan.
Parts supplier O’Reilly Automotive (ORLY.O) said in its conference call last week that it raised the prices of its products to make up for higher costs related to the tariffs.
Network gear maker Juniper Networks Inc (JNPR.N) on Thursday missed the mid-point of its margin guidance due to the tariffs, saying it expected pressure to continue, even as it manages its operating expenses to mitigate the damage.
· The next head of the International Monetary Fund (IMF) will have to deal with trade wars, currency manipulation and new digital currencies, a strategist told CNBC Monday.
On Monday, the IMF opened the official process to choose its next chief, after Christine Lagarde resigned earlier this month to take on a new role. Throughout the Fund’s history, the managing director has always been from Europe and the 28 European countries are gearing up to rally behind another European to take on the job.
· Japan’s factory output fell more than expected in June after two straight months of gains, adding to a slew of data suggesting that slowing global growth and the protracted U.S.-China trade war were taking a toll on the export-reliant economy.
The data comes ahead of the Bank of Japan’s two-day policy meeting that ends later on Tuesday, where the board is expected to scrutinize the impact overseas risks could have on its view the economy will sustain a moderate recovery.
Industrial output fell 3.6% in June, government data showed on Tuesday, more than a median market forecast for a 2.0% drop. It followed a 2.0% rise in the previous month.
· Oil prices edged higher on Monday as the prospect of an expected interest rate cut by the U.S. Federal Reserve overshadowed pessimism over U.S.-China trade talks and worries about slower global economic growth.
Brent crude rose 0.2% to $63.60 a barrel, while U.S. West Texas Intermediate (WTI) crude futures settled up 1.2% at $56.87 a barrel.
Reference: CNBC, Rueters
Thai
Eng