· The dollar held gains on Thursday after minutes from the Federal Reserve’s last policy meeting hosed down some aggressive expectations the central bank would embark on a series of deep interest rate cuts.
Asian currencies are expected to trade in tight ranges on Thursday ahead of U.S. Federal Reserve Chairman Jerome Powell’s speech at Jackson Hole on Friday for signs of just how far the U.S. central bank is prepared to lower rates.
· “Yields are supportive of the dollar for now, but this may not last after Powell’s speech,” said Junichi Ishikawa, senior foreign exchange strategist at IG Securities in Tokyo.
“Additional rate cuts are thoroughly priced in. If Powell sounds slightly hawkish, stocks could sell off, which would hurt the dollar against safe-haven currencies like the yen.”
· The dollar held steady at 106.50 yen following a 0.36% gain on Wednesday, its biggest since Aug. 13.
The greenback drifted higher versus the Chinese yuan in offshore trade, last trading at 7.0694 yuan. In onshore trading, the yuan opened at 7.0635 per dollar versus its previous close at 7.0633.
· The Group of Seven (G-7) summit is set to end without a joint communique for the first time in its 44-year history, after French President Emmanuel Macron decided to abandon the tradition citing “a very deep crisis of democracy.”
Speaking to reporters ahead of the G-7 meeting at a news conference in Paris on Wednesday, Macron said an attempt to produce a joint communique would most likely be a “pointless” exercise.
He referenced President Donald Trump’s decision to withdraw from a landmark climate agreement restricting global efforts to cut carbon as one example of why it would be difficult to display a united front.
· The United States has more to lose from a full-blown trade war with the EU than it does with its current conflict with China, experts have told CNBC.
President Donald Trump has kept up his tough rhetoric against the European Union despite focusing on Chinese tariffs in recent months. But his administration is due to decide in November whether to impose duties on one of most important industries in Europe: autos.
There have already been tariffs on European steel and aluminum — which led the bloc to impose duties of 25% on $2.8 billion of U.S. products in June 2018, and, there’s an ongoing dispute regarding Airbus and Boeing — but experts believe a wider spat with Europe would be much more damaging than the current tit-for-tat with China. Leaders of the G-7, the world’s seven largest economies, are due to talk global trade at a meeting in France later this week.
“EU-U.S. trade matters most. It is by far the biggest single bilateral trade flow in the world,” Florian Hense, an economist at Berenberg, told CNBC via email.
“Counting exports and imports of goods and services, U.S.-EU bilateral trade exceeded that between the U.S. and China in 2018 by more than 70%,” he added.
· Germany’s private sector continued to struggle in August as a manufacturing recession dragged on and activity in the services sector eased slightly, a survey showed on Thursday, suggesting Europe’s largest economy is heading for a recession.
Markit’s flash composite Purchasing Managers’ Index (PMI), which tracks the manufacturing and services sectors that together account for more than two-thirds of the economy, edged up to 51.4 from 50.9 the previous month.
· The United States and North Korea are expected to reopen denuclearization talks soon and it would “go well,” a senior South Korean official said on Thursday, boosting hopes for progress in negotiations after a prolonged stalemate.
South Korea’s deputy national security adviser Kim Hyun-chong gave his upbeat assessment after meeting with U.S. envoy for North Korea Stephen Biegun in Seoul.
· A North Korean spokesman said on Thursday the United States’ recent mid-range cruise missile test and plans to deploy F-35 jets and offensive military equipment around the Korean peninsula were “dangerous” moves that would “trigger a new cold war” in the region.
North Korea remains unchanged in its position to resolve all issues through dialogue and negotiation, a North Korean Foreign Ministry spokesman said, but “dialogue accompanied by military threats is of no interest to us,” according to state media KCNA.
· Oil prices dipped on Thursday, paring earlier gains, weighed down by worries about the global economy and bigger-than-expected builds in oil product inventories in the United States, the world’s biggest oil consumer.
Brent crude futures LCOc1 dropped 16 cents, or 0.3%, to $60.14 a barrel by 0634 GMT on Thursday.
West Texas Intermediate (WTI) crude CLc1 futures slipped 10 cents, or 0.2% to $55.58 per barrel.
“Oil markets continue to move lower after the gloomy surprise build in U.S. fuel inventories,” said Stephen Innes, managing partner at Valour Markets.
U.S. gasoline and distillate stockpiles rose more than expected last week, while crude inventories fell as refineries hiked production, the Energy Information Administration said on Wednesday.
Traders were worried about the prospects for global oil demand especially amid trade tensions between the U.S and China, the world’s two biggest economies and oil users.
· WTI technical analysis: Upside is being capped by falling channel resistance
WTI oil is currently trading at $55.96 per barrel, having faced rejection at the confluence of the 200-day moving average (MA) and a bearish channel resistance at $56.10 earlier today.
So, the focus today is on $55.57 (Wednesday's low). Acceptance below that level would confirm a bearish hammer reversal and open the doors for $53.79 (Aug. 15 low).
On the other hand, a daily close above the upper edge of the falling channel, currently at $56.10, would signal a continuation of the rally from the Aug. 7 low of $50.55.
Reference: CNBC, Reuters, FX Street
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