· The yen was little changed versus the dollar on Tuesday, trading near a three-week low after the Bank of Japan left monetary policy on hold as expected, and as investors pared expectations for aggressive rate cuts from the U.S. Federal Reserve.
The yen JPY=EBS was quoted at 108.740 per dollar, little changed on the day. The yen fell to a three-week low of 108.950 early in Asian trading.
The Fed is expected to cut rates by 25 basis points on Wednesday, and investors are watching for clues on whether the move may be a one-off or the first in a series of several cuts, as many traders are anticipating.
“There is some relief that the BOJ ended without surprise, so now the focus moves to the Fed,” said Takuya Kanda, general manager of research at Gaitame.Com Research Institute.
· The dollar index .DXY was little changed at 98.163, near a two-month high of 98.165.
The Fed is forecast to cut its target interest rate range on Wednesday by 25 basis points to 2.00%-2.25%.
Investors previously saw the chance of an even more aggressive 50-basis point cut, according to interest rate swaps, but these expectations have dissipated as data has shown the U.S. economy is not as weak as some feared.
· The pound hit a new 28-month low early in Asia trade as investors grew increasingly nervous about the prospects of a no-deal Brexit under new British Prime Minister Boris Johnson.
Sterling GBP=D3 extended its decline, falling to $1.2164, the lowest since March 2017.
Sterling has fallen against the dollar for the past four trading days, because there is a growing risk of a no-deal Brexit where Britain exits the European Union without a trade deal in place. There is also a chance that new Prime Minister Johnson will call an early election.
· EUR/USD does not rule out a test of 1.1100
EUR/USD remains under pressure so far this week and still targets a visit to recent yearly lows in the boundaries of 1.1100 the figure. However, persistent shrinking volume could remove some strength from the decline in the short-term.
· GBP/USD: Bears eye 1.2100 amid Brexit gloom
· U.S. and Chinese trade negotiators shift to Shanghai this week for their first in-person talks since a G20 truce last month, a change of scenery for two sides struggling to resolve deep differences on how to end a year-long trade war.
Expectations for progress during the two-day Shanghai meeting are low, so officials and businesses are hoping Washington and Beijing can at least detail commitments for “goodwill” gestures and clear the path for future negotiations.
These include Chinese purchases of U.S. farm commodities and the United States allowing firms to resume some sales to China’s tech giant Huawei Technologies.
President Donald Trump said on Friday that he thinks China may not want to sign a trade deal until after the 2020 election in the hope that they could then negotiate more favorable terms with a different U.S. president.
· American companies remain keen on tapping business opportunities in China, despite the trade tensions between the two countries.
· French growth slowed slightly in the second quarter as consumer spending eased and companies drew down inventories, official data showed on Tuesday.
The euro zone’s second-biggest economy grew 0.2% in the April-June period, down from 0.3% in the previous three months, according to preliminary data from the INSEE statistics agency.
· Oil prices rose for a fourth day on Tuesday on optimism the U.S. Federal Reserve will this week cut interest rates for the first time in more than ten years, which should support economic and fuel demand growth in the world’s biggest oil user.
Brent crude rose 33 cents, or 0.5%, to $64.04 a barrel by 0435 GMT, after gaining 0.4% the previous session.
U.S. crude was up 30 cents or 0.5%, at $57.17 a barrel, having risen 1.2% on Monday.
· So-called dovish monetary policy in the United States, where the central bank reduces interest rates, would “support a continuation in global expansionary activities and fuel demand growth” for the second half of 2019, Benjamin Lu, an analyst at Phillip Futures in Singapore, said in a note.
“If the Fed is a little more dovish and prices in a 75 basis points cut ... we might see oil pushing up towards $60,” Lu said by phone, referring to U.S. crude.
Reference: CNBC, Reuters, FXStreet
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