• The euro edged lower and the dollar strengthened broadly on Friday, awaiting a keynote speech by the head of the Federal Reserve after some of his fellow policymakers signaled reluctance to cut U.S. interest rates further.
Fed Chairman Jerome Powell is expected to address the Jackson Hole symposium of central bankers at 1400 GMT, and traders will be keen to see how closely he allies himself with the hawkish camp.
Expectations that the Fed will cut rates at its next meeting in September are still very high, according to interest rate futures, but the currency market is likely to react if the tone of Powell’s comments does not match these dovish expectations, analysts said.
• “I would expect him to stress that the U.S. economy is strong enough that...just a rate cut or two, taken out as ‘insurance’, will be enough to keep the recovery on track,” said Marshall Gittler, chief strategist at ACLS Global.
“That’s probably more hawkish than what the market is expecting and could be positive for the dollar.”
• The euro was down 0.1% at $1.1067 after falling to a three-week low of $1.1061 earlier EUR=EBS. The index which tracks the dollar against six major currencies .DXY was up by 0.2% at 98.35.
· Arturo Estrella, the economist who first discovered the predictive power of the yield curve, has a message for recession naysayers: It could hit sooner than you think.
“It’s been 50 years and 7 recessions with a perfect record,” Estrella told CNBC in a message Thursday. “It’s impossible to be 100% sure about the future but I’d say the chances of a recession in the second half next year are pretty high.”
· German lender Commerzbank (CBKG.DE) is discussing a further 1,800 to 2,500 job cuts, business daily Boersen-Zeitung on Friday cited company sources as saying.
Final decisions on the cuts are due to be made during strategy meetings between the management and supervisory boards at the end of September, the report said.
· North Korea’s top diplomat said on Friday that U.S. Secretary of State Mike Pompeo was a “diehard toxin” who only complicates denuclearisation talks and North Korea was ready for both dialogue and standoff.
Since the Vietnam summit, North Korea has demanded that Pompeo be replaced with a “more mature” person, while lauding the rapport built between Kim and Trump.
North Korean Foreign Minister Ri Yong Ho, who took part in the Hanoi summit along with Pompeo, called the chief U.S. negotiator the “diehard toxin of the U.S. diplomacy” who employs “hackneyed sanctions rhetoric”.
· When Federal Reserve Chair Jerome Powell speaks in Jackson Hole, Wyoming, on Friday, traders will comb through his remarks for clues on whether the U.S. central bank will deliver more rate cuts this year.
They may be disappointed.
For all his reputation as the most plain-spoken person to run the U.S. central bank in decades, if not ever, Powell may be reluctant in his remarks to fellow central bankers at this year’s Kansas City Fed economic symposium to say much about where rates will go. The reason: he may not actually know, and does not want to get locked in.
· Prime Minister Shinzo Abe said on Friday Japan still expects South Korea to keep its promises on the contentious issue of wartime forced labor and to work to rebuild trust.
Abe’s comments followed South Korea’s announcement on Thursday that it was ending an intelligence-sharing agreement with Japan amid a dispute over compensation for South Koreans pressed into wartime labor during Japan’s occupation of Korea.
Japanese Minister of Defence Takeshi Iwaya said on Friday South Korea’s decision to end an intelligence-sharing pact was regrettable and showed it failed to appreciate the growing national security threat posed by North Korean missiles.
· Top negotiators for Japan and the United States on Thursday failed to reach an agreement on a two-way trade deal and decided to extend talks for another day in a last-ditch effort to bring tangibles to a weekend bilateral summit.
After marathon four-hour talks with U.S. Trade Representative Robert Ligthizer on Thursday, Japanese Economy Minister Toshimitsu Motegi told reporters that the two countries were “getting closer to reach a conclusion”.
· The Trump administration is still planning for a round of in-person talks between U.S. and Chinese officials in September after a constructive exchange this week between deputy-level negotiators, White House economic adviser Larry Kudlow said on Thursday.
He added that the deputies had agreed to another conference call and were working through some of the key issues to make recommendations to the principals.
“We are still planning for the Chinese team to come over here in September,” Kudlow said, declining to name a date.
· Oil prices clawed back the previous day’s losses on Friday, with Brent nudging above $60 a barrel, as tighter supplies from key producers offset slowing demand growth and investors await clues on the U.S. Federal Reserve’s monetary policy.
Brent crude LCOc1 rose 29 cents, or 0.5%, to $60.21 a barrel by 0629 GMT, while U.S. crude futures CLc1 were at $55.53 a barrel, up 18 cents, or 0.3%. Both contracts were on track for a second week of gains.
Reference: CNBC, Reuters, FX Street
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