· The dollar lacked direction on Tuesday as traders held off on making big moves ahead of the Federal Reserve meeting concluding Wednesday, at which policymakers are expected to cut interest rates for the first time since the financial crisis 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 interest rate cuts by countries facing more imminent risks. Markets will be watching the Fed’s forward guidance for clarity on whether the committee sees the cut as a one-off or as the beginning of a rate-cutting cycle.
The euro hovered on Tuesday around the 26-month low it reached last week of $1.110. Although the Fed is expected to lower rates, U.S. yields will remain above those in the euro zone, making the dollar a more attractive investment for yield-seeking traders.
The pound was the biggest mover in the foreign exchange market, plunging to a new 28-month low of $1.212 in Asian trading on growing concerns that Britain could crash out of the European Union without a transition agreement on Oct. 31.
Sterling was last down 0.33% at $1.217. It was also weaker against the euro by 0.37% at 91.54 pence, having earlier touched a two-year low of 91.88 pence.
The Japanese yen was last up by 0.21% at 108.54 yen per dollar after the Bank of Japan on Tuesday maintained its pledge to keep short-term interest rates at a negative 0.1% via aggressive bond purchases, as expected.
· President Donald Trump ripped into China in a series of tweets Tuesday just as the two sides are set to resume stalled negotiations toward a much-anticipated trade agreement.
The president claimed that China is not buying more U.S. agricultural products as it promised to do and may be slow-walking the talks as it awaits the outcome of the 2020 presidential election.
“China is doing very badly, worst year in 27 - was supposed to start buying our agricultural product now - no signs that they are doing so. That is the problem with China, they just don’t come through,” Trump wrote.
· U.S. President Donald Trump on Tuesday warned China against waiting out his first term to finalize any trade deal, saying if he wins re-election in the November 2020 U.S. presidential contest, the outcome will be worse for China.
As a new round of U.S.-China trade negotiations got underway in Shanghai, Trump said on Twitter: “The problem with them waiting ... is that if & when I win, the deal that they get will be much tougher than what we are negotiating now ... or no deal at all.”
· Investment in Britain’s car sector fell by more than 70 percent in the first half of the year due to concerns about a disorderly Brexit, an industry body said on Wednesday, warning that leaving the EU without an agreement was the “worst outcome”.
The automotive industry, Britain’s biggest exporter of goods which employs over 800,000 people, is one of the most vociferous opponents of a no-deal Brexit, fearing additional tariffs and bureaucracy could halt production.
· Optimism among smaller British manufacturers tumbled to a three-year low in July, hit by a slowing global economy and the Brexit crisis at home, although consumers remain relatively upbeat, surveys on Wednesday showed.
The Confederation of British Industry’s (CBI) gauge of optimism among small- and medium-sized (SME) manufacturers fell to -28 from -12 in April, its lowest level since July 2016, just after Britain voted to leave the European Union.
· The unidentified projectiles launched by North Korea early on Wednesday were ballistic missiles that flew about 250 km (155 miles), South Korea’s Joint Chiefs of Staff said.
The projectiles appeared to be a different type to previous launches, minister Jeong Kyeong-doo said, according to South Korean news agency Yonhap.
Japan’s defense minister said any ballistic missile launch by North Korea would violate United Nations resolutions, Japan’s Kyodo news agency reported.
· Oil prices rose about 2% to a two-week high on Tuesday on optimism the U.S. Federal Reserve will cut interest rates this week for the first time in more than 10 years, boosting demand expectations in the world’s biggest oil user.
On its second-to-last day as the front-month contract, Brent LCOc1 futures for September delivery gained $1.01, or 1.6%, to settle at $64.72 a barrel, while U.S. West Texas Intermediate (WTI) crude CLc1 gained$1.18, or 2.1%, to settle at $58.05.
That put both contracts up for a fourth day in a row to their highest closes since July 15.
Reference: CNBC, Reutures
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