· The U.S. dollar dropped broadly on Friday after President Donald Trump ordered U.S. companies to start looking for an alternative to China after Beijing imposed more tariffs on American goods, further escalating tension between the world’s two largest economies in a prolonged trade dispute.
That triggered mass selling in the dollar, which fell from a three-week high against the euro and to one-week troughs versus the yen and Swiss franc. Benchmark U.S. 10-year Treasury yields also fell sharply. The dollar, however, strengthened against the Chinese yuan in the offshore market, hitting a two-week high.
In midday trading, the euro rose 0.5% to $1.1134, after earlier touching a three-week low of $1.1052.
An index that tracks the dollar against six major currencies was down 0.55% at 97.64. The dollar fell to a one-week low against the yen and was last at 105.46, down 0.9%. It earlier hit a one-week high of 106.73.
Against the Chinese yuan, the dollar was up 0.6% at 7.13 yuan, after earlier touching a two-week peak of 7.1332.
· The critical spread between the 10-year Treasury yield and the 2-year yield inverted multiple times throughout Friday’s trading session after President Donald Trump ordered American companies to steer clear of trade with Beijing.
The president tweeted Friday morning that he was ordering “our great American companies” to “immediately start looking for an alternative to China, including bringing your companies HOME and making your products in the USA.”
Early Friday afternoon, the yield on the benchmark 10-year Treasury note traded at 1.535%, while the yield on the 2-year Treasury note held at 1.513%, an inversion of a key segment of the U.S. yield curve. The rates dipped into and out of inversion throughout the rest of the trading session.
An inversion of the 2-10 yields is viewed by fixed income traders as a recession prognosticator, but trying to forecast exactly when GDP growth contracts is harder to project.
· Jerome H. Powell, the Federal Reserve chair, kept future interest rate cuts squarely on the table on Friday but suggested that the central bank was limited in its ability to counteract President Trump’s trade policies, which are stoking uncertainty and posing risks to the economic outlook.
Mr. Powell’s remarks drew a swift and angry reaction from Mr. Trump, who equated the Fed leader with the president’s adversary in the trade war, President Xi Jinping of China.
“My only question is, who is our bigger enemy, Jay Powell or Chairman Xi?,” Mr. Trump wrote in one of a series of Twitter posts.
The president’s harsh response to Mr. Powell, a frequent target of Mr. Trump’s ire, came after the Fed chair suggested that the central bank may be unable to overcome economic uncertainty stemming from the president’s trade war.
“Trade policy uncertainty seems to be playing a role in the global slowdown and in weak manufacturing and capital spending in the United States,” Mr. Powell said, adding that there were “no recent precedents to guide any policy response to the current situation.”
· His comments followed Beijing’s announcement on Friday that China would retaliate against the Trump administration’s next round of tariffs by increasing taxes on $75 billion of American imports, including agricultural products, crude oil and cars. Both countries plan to increase their levies in September and December, which could exacerbate the economic harm from a trade war that is already causing financial pain across the globe.
They also come as trade tensions, and not just those created by Mr. Trump, threaten growth abroad. Mark Carney, who heads the Bank of England, said in a Jackson Hole speech that the threat of an unruly Brexit looms large for his domestic economy.
“In recent weeks, the perceived likelihood of No Deal has risen sharply,” he said. “In my view, the appropriate policy path would be more likely to ease than not” if that should happen, though the right approach would hinge on the details.
· Trump threatens to raise tariffs on Chinese goods to 30% amid escalating trade war
· President Donald Trump on Friday counterpunched against retaliatory tariffs announced by Beijing earlier in the day, pledging to hike the rates importers must pay on Chinese-made goods even higher.
Trump said the US will raise tariffs from 25% to 30% on $250 billion in goods that are already being taxed starting October 1.
He also threatened to ratchet up promised tariffs on the remaining $300 billion in Chinese imports from 10% to 15%. Those tariffs, which would hit mostly consumer items, are set to begin taking effect September 1, though most goods will be duty-free until December 15 -- a move Trump made to avoid putting a damper on holiday retail sales.
The President's announcement came after Beijing unveiled a new round of retaliatory tariffs on about $75 billion worth of US goods. China will place additional tariffs of 5% or 10% on US imports starting on September 1, according to a statement posted by China's Finance Ministry.
· France — President Donald Trump renewed calls Sunday to readmit Russia to the G-7 while attending the summit in Biarritz, France.
“I think it’s a work in progress. We have a number of people that would like to see Russia back,” Trump said when asked if there was an update about adding the former member to the group. “I don’t know if we will make a decision one way or the other but we did have a discussion about Russia last night as to whether or not we want to invite them back,” he added.
louding the G-7 gathering, which represents the world’s major industrial economies, is the U.K.’s uncertain exit from the European Union.
“He needs no advice, he’s the right man for the job,” Trump said when asked if he had any guidance for Johnson on how to deliver Brexit. “This is a different person and this is a person that is going to be a great prime minister in my opinion,” Trump added of the new prime minister.
Trump said that he would have a major trade deal with U.K. upon leaving the European Union.
“We’re are having very good trade talks between the U.K. and ourselves. We’re going to do a very big trade deal, bigger than we’ve ever had with the UK,” Trump said. “At some point, they won’t have the obstacle of, they won’t have the anchor around their ankle, because that’s what they had. So, we’re going to have some very good trade talks and big numbers,” he said without adding any more detail on a potential deal.
· President Donald Trump said Sunday he could declare the escalating U.S.-China trade war as a national emergency if he wanted to.
“In many ways this is an emergency,” Trump said at the G-7 leaders meeting of the ongoing trade battle between the world’s top two economies.
· Oil prices fell on Friday after China unveiled retaliatory tariffs against about $75 billion worth of U.S. goods, marking another escalation of a protracted trade dispute between the world’s two largest economies.
Brent crude futures fell 50 cents, or 0.8%, to $59.40 a barrel. U.S. West Texas Intermediate (WTI) crude futures fell $1.18, or 2.1%, to settle at $54.17 a barrel.
China’s commerce ministry said it would impose additional tariffs of 5% or 10% on a total of 5,078 products originating from the United States, including agricultural products such as soybeans, crude oil and small aircraft.
In retaliation, U.S. President Donald Trump said he was ordering U.S. companies to look at ways to close their operations in China and make more of their products in the United States instead.
Reference: CNBC, Reuters, New York Times, CNN
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