· The dollar traded lower on Tuesday, in line with the drop in Treasury yields, as investors braced for a potentially dovish Federal Reserve at a Jackson Hole, Wyoming, gathering later this week, with many expecting an announcement of some measure that would ease U.S. recession concerns.
Markets also cautiously awaited Fed Chairman Jerome Powell’s speech on Friday in Jackson Hole.
In midday trading, the dollar fell 0.3% against the yen to 106.34 yen and was down 0.3% versus the Swiss franc at 0.9792 franc.
The dollar index was down 0.1% at 98.255 after earlier rising to a 2-1/2-week high of 98.40. It reached its 2019 high of 98.932 at the beginning of the month. The euro rose 0.2% against the dollar to $1.1093 after Italy’s prime minister announced his resignation on Tuesday even as he made a blistering attack on his own interior minister, Matteo Salvini, accusing him of sinking the ruling coalition and endangering the economy for personal and political gain.
· Italian Prime Minister Giuseppe Conte announced his intention to resign on Tuesday, as a political crisis rumbles on in Rome that could eventually lead to new elections.
Conte has been under pressure since one of the country’s deputy prime ministers — Matteo Salvini, who leads the right-wing Lega party — called for a snap election earlier this month. Salvini declared the populist coalition government unworkable and called for a no-confidence vote in Conte.
· U.S. government debt yields fell Tuesday as hopes for stimulus in major economies appeared to soothe investor concerns about a possible global recession.
The yield on the benchmark 10-year Treasury note, which moves inversely to price, was lower at around 1.559%, while the yield on the 30-year Treasury bond was also lower at around 2.045%.
· Market participants were cheered by signs policymakers appeared willing to do more to support their economies amid international trade frictions, led by a protracted dispute between the U.S. and China.
· Secretary of State Mike Pompeo told a group of business executives and free-trade economists that he believes the trade war with China could come to an end by the 2020 presidential election, according to people who attended the gathering.
At a private lunch in New York on Tuesday, Pompeo spoke in front of a crowd of about 40 people that included economics writer Stephen Moore, Blackstone CEO Steve Schwarzman, Gristedes supermarket founder John Catsimatidis and former New York GOP chairman Ed Cox, according to people who attended the gathering.
· President Donald Trump believes he has quite the bargaining chip with the European Union.
“Dealing with the European Union is very difficult; they drive a high bargain,” Trump told reporters at the White House on Tuesday. “We have all the cards in this country because all we have to do is tax their cars and they’d give us anything we wanted because they send millions of Mercedes over. They send millions of BMWs over.”
The threat came after Trump signed a deal with the EU earlier this month to boost U.S. beef exports.
The president had vowed to impose tariffs on imported vehicles and parts from the EU and Japan but he decided to delay the duty for 180 days in mid-May.
· China’s ability to quickly finance its military has the Pentagon especially eager to develop hypersonic weapons, amid a budding arms race between the world’s top two economies.
“China has a robust global economy, their ability to afford new offensive systems is quite significant, and we have to take note of that,” Mike Griffin, the Pentagon’s top engineer, told CNBC at the Space and Missile Defense Symposium in Huntsville.
“I think it’s clear that in the realm of hypersonics we are playing catch up, especially relative to the Chinese. We need to be able to not only match but to overmatch, especially the Chinese,” Griffin said.
The United States does not have a defense against hypersonic weapons, which can travel at least five times the speed of sound, or a little more than a mile per second. Combined with blistering speed, maneuverability and long-range flight, these weapons are difficult to track, target and defeat.
· Oil prices steadied on Tuesday on optimism U.S.-China trade tensions will ease and hopes major economies will take stimulus measures to ward off a possible economic slowdown, after falling earlier on concerns over future demand.
Brent crude rose 3 cents to $59.77 a barrel by 12:10 p.m. EDT (1510 GMT), while U.S. crude was down 11 cents at $56.10 a barrel. Both contracts had traded lower earlier in the session.
The United States said it would extend a reprieve that permits China’s Huawei Technologies to buy components from U.S. companies, signaling a slight softening of the trade conflict between the world’s two largest economies.
Reference: CNBC, Reuters
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