· The dollar dropped against the euro and yen on Wednesday, in line with falls in equities and Treasury yields, amid worries about global growth following data a day earlier that showed a sharp decline in U.S. manufacturing activity.
A U.S. payrolls report on the private sector showed a lower-than-expected figure for September, but market participants were relieved the data was not as bad as many initially feared especially in the wake of poor U.S. manufacturing numbers. Data from the U.S. payrolls processor ADP showed that U.S. private sector jobs totaled 135,000 last month, lower than the 140,000 consensus forecast.
The dollar initially trimmed losses against the yen and euro after the U.S. jobs data.
Many analysts, however, say the dollar’s higher yield and the relative strength of the U.S. economy should make its setback temporary. Non-farm payrolls data due on Friday should give more insight into the health of the U.S. economy.
· In morning trading, the dollar fell 0.3% against the yen to 107.39 yen, reflecting investor demand for safer assets after the manufacturing data heightened concerns about the health of the global economy.
· The euro rose 0.1% against the dollar to $1.0944 but was above Tuesday’s two-year low of $1.0879.
· The dollar index, which measures the greenback’s value against a basket of six major currencies, was little changed at 99.13 after reaching 99.667 on Tuesday, a 29-month peak, before the manufacturing data was released
· The pound was down 0.1% at $1.2290 amid doubt over whether Prime Minister Boris Johnson’s final Brexit offer to the European Union would be well-received by Brussels.
· British Prime Minister Boris Johnson made a final Brexit offer to the European Union on Wednesday, pitching a possible compromise for a last-minute exit deal that was cautiously welcomed by the EU though the two sides still remain far apart.
· A new Brexit plan from Prime Minister Boris Johnson would likely win enough support to be approved by Britain’s Parliament, senior minister Michael Gove said on Wednesday, adding that Brussels should take confidence from that.
The British Parliament rejected three times an earlier Withdrawal Agreement struck by former Prime Minister Theresa May, but some lawmakers from the most pro-Brexit wing of the ruling Conservatives and some opposition Labour lawmakers have signaled their backing for Johnson’s new proposal.
· Weak U.S. private sector jobs data and a jump in expectations that the Federal Reserve will cut interest rates in October drove two-year Treasury yields to a one-month low on Wednesday.
The ADP National Employment Report showed hiring by U.S. private employers slowed in September, adding to the growing evidence this week that the economy is weakening.
Expectations the Fed will cut rates by 25 basis points from its current target rate of 1.75%-2.0% in October leapt to 74.3% on Wednesday from 39.6% on Monday, according to CME Group’s FedWatch tool.
The two-year Treasury yield, which is a proxy for investor expectations of interest rate moves, was 5.6 basis points lower in morning trade at 1.498%, extending a 6.6 basis point fall a day earlier when the United States reported the weakest manufacturing data in more than a decade.
The benchmark 10-year note yield was last 4 basis points lower at 1.604%, with the 30-year bond yield down 3.1 basis points at 2.074%.
· The United States will impose 10% tariffs on aircraft and 25% on other industrial and agricultural products from the European Union as part of a World Trade Organization penalty award in a long-running aircraft subsidy case, an official with the U.S. Trade Representative’s office said on Wednesday.
The tariffs are expected to take effect on Oct. 15, the official said. He did not specify the total amount of EU goods to face tariffs. The WTO allowed the EU on Wednesday to slap import tariffs on $7.5 billion worth of European goods over illegal EU subsidies handed to Airbus.
· Oil prices fell more than 2% on Wednesday after official data showed a rise in U.S. crude inventories, adding to worries about an oversupplied market as weak economic readings in the United States depressed global financial markets.
Brent crude futures settled down $1.20, or 2%, at $57.69 a barrel. U.S. West Texas Intermediate (WTI) crude futures fell 98 cents, or 1.8%, to settle $52.64 a barrel.
Wall Street’s main indexes tumbled more than 2% as data suggested fallout from the U.S.-China trade war was hurting the U.S. labor market. World equity benchmarks hit their lowest levels in a month.
U.S. crude inventories rose 3.1 million barrels last week, the Energy Information Administration said, far exceeding analyst expectations for an increase of 1.6 million barrels.
Crude stocks at the Cushing, Oklahoma, delivery hub for WTI fell by 201,000 barrels, EIA said.
· North Korea said on Thursday it had successfully test-fired a new submarine-launched ballistic missile (SLBM) from sea to contain external threats and bolster self-defense, ahead of fresh nuclear talks with the United States.
Reference: CNBC, Reuters
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