· Dollar treads water on Fed views, geopolitics
The dollar was little changed on Wednesday after U.S. retail sales rose more than expected in May, although caution kept investors from aggressively buying riskier currencies like the Australian dollar.
U.S. Federal Reserve Chairman Jerome Powell doused some of the market’s optimism on Tuesday with a rather bleak picture of the U.S. economy, while also reinforcing hopes for continued policy support.
Discouraging news over the past 24 hours — record-high coronavirus infections in six U.S. states, clashes between Indian and Chinese troops in the western Himalayas and new coronavirus cases in Beijing — also undermined sentiment.
Against a basket of other currencies, the dollar edged 0.1% lower to 96.89. The index has bottomed out after reaching a three-month low last week, but the broad outlook remains pessimistic.
The Fed’s Powell said that a full U.S. economic recovery will not occur until the American people are sure the novel coronavirus epidemic has been brought under control.
The Fed’s cautious message also checked the momentum in the euro, which held below a three-month high of $1.1422 reached last week. It was trading at $1.1286 on Wednesday after rallying nearly 5% since a Franco-German proposal for a recovery fund in late May.
Brexit developments continued to hobble the British pound. Sterling was steady around $1.2576, below a three-month high above $1.28 hit earlier this month.
· WHO sees 'great news' in steroid's trial results in COVID-19
The World Health Organization (WHO) hailed as “great news” initial clinical trial results that showed a cheap and widely used steroid called dexamethasone can help save the lives of critically ill COVID-19 patients.
“This is the first treatment to be shown to reduce mortality in patients with COVID-19 requiring oxygen or ventilator support,” WHO Director-General Tedros Adhanom Ghebreyesus said in a statement late on Tuesday.
· U.S. bank profits plunge 70% on coronavirus loss provisioning
U.S. bank profits fell by 69.6% to $18.5 billion in the first quarter of 2020 from the year prior as banks felt the economic impact of the novel coronavirus pandemic, according to data from a banking regulator.
The Federal Deposit Insurance Corporation reported that “deteriorating economic activity” caused lenders to write off delinquent debt and set aside billions of dollars to guard against future losses. Over half of all banks reported a profit decline, and 7.3% of lenders were unprofitable.
· Australia says borders likely to stay closed until 2021
Australia is unlikely to reopen its border to international travellers until next year but will look to relax entry rules for students and other long-term visitors, Trade Minister Simon Birmingham said on Wednesday.
Australia has been largely successful in containing the spread of the novel coronavirus, which it attributes to curbs on international travel and tough social-distancing rules.
· Russia could cut interest rates to a historic low, but economists see little impact
The Central Bank of Russia (CBR) is expected to cut its benchmark interest rate on Friday to its lowest level since the fall of the Soviet Union.
Bank Governor Elvira Nabiullina said last week that lower inflation across the first five months of the year has freed up space for the central bank to make further cuts, as it looks to shore up the economy in the aftermath of the coronavirus pandemic.
Economists are torn on the size of the reduction, with some expecting 50 basis points, bringing the rate to 5% following a 50 basis point cut in April. This equals a post-Soviet Union low reached in June 2010. Others anticipate a much more heavy-handed 100 basis point cut this time around.
After economic conditions seemingly bottomed out in April and began to rebound in May and June, stronger domestic inflationary pressures may return, according to Matthias Karabaczek, European analyst at the Economist Intelligence Unit.
· Beijing cuts flights to curb potential spread of mounting coronavirus cases
Scores of domestic flights in and out of Beijing were cancelled on Wednesday as officials ramped up attempts to contain a coronavirus outbreak in the Chinese capital over the past week that has sparked fears of renewed wider contagion.
Health officials recorded 31 new confirmed infections for June 16, bringing the cumulative infections since Thursday to 137 cases, the worst resurgence of the disease in the city since early February.
· Japan's exports fall most since 2009 as U.S. demand slumps
Japan’s exports fell in May at the fastest pace since the 2009 global financial crisis as U.S.-bound car shipments plunged, bolstering expectations for a deeper contraction in the world’s third-largest economy this quarter.
Weak global appetite for cars and slowing business spending could drag on Japan’s export-led economy, as China-bound trade remains weak, dashing hopes mainland demand could offset the weakness seen in other major trading partners.
Official data out Wednesday showed Japan’s exports fell 28.3% in the year to May, the largest slump since September 2009. The result was worse than a 26.1% decrease expected in a Reuters poll and extended double-digit declines for a third straight month.
· Oil falls as U.S. crude stocks build amid virus resurgence fears
Oil prices declined on Wednesday as data showed an increase in U.S. crude and fuel inventories, raising the prospect of oversupply as a potential second wave of the coronavirus pandemic threatened to halt any recovery in demand.
Brent crude LCOc1 futures were down 29 cents, or 0.7%, at $40.67 a barrel as of 0656 GMT, and U.S. West Texas Intermediate (WTI) CLc1 futures fell 43 cents, or 1.1%, to $37.95 a barrel.
Both benchmarks rose more than 3% on Tuesday, after the International Energy Agency (IEA) raised its 2020 oil demand forecast to 91.7 million barrels per day (bpd) and U.S. retail sales posted a record jump in May.
The rise in U.S. crude and fuel inventories, however, stoked concerns about a surplus and pressured oil prices, as the number of coronavirus infections surpassed 8 million globally and several U.S. states saw their case numbers spike.
U.S. crude oil inventories rose by 3.9 million barrels in the week to June 12 to 543.2 million barrels, according to data from industry group the American Petroleum Institute (API), countering expectations for a fall of 152,000 barrels.
· Barclays raises 2020 oil price forecast by $4, WTI seen at $37
The Barclays Research Team up their oil-price forecast for 2020 but remain cautious in the near-term.
"Raises forecasts for 2020 by $4 per barrel.
- Brent now seen at $41 / barrel while WTI at $37.
- Express caution in the near term.
- Improvement in demand ahead depends on the behavior of consumer.
- Renewed coronavirus concerns will keep driving demand subdued. "
· South Korea says will no longer accept unreasonable behavior by North Korea
South Korea’s presidential Blue House said on Wednesday that recent North Korean criticism of President Moon Jae-in was senseless and that it will no longer accept unreasonable behavior by the North.
The Blue House comments came a day after North Korea blew up an inter-Korean liaison office on its side of the border.
· Tensions between North and South Korea to escalate further after Pyongyang bombed joint office, analysts say
Tensions between the two Koreas may continue to rise after a joint liaison office in a border town was blown up, analysts said on Wednesday.
“We are going to see a gradual incremental ramping up of tensions,” said Jung Pak, a senior fellow at Brookings Institution.
The demolition of the joint liaison office on Tuesday came after Pyongyang said it was cutting off a hotline with South Korea and threatened to abandon an inter-Korean military agreement that aimed to reduce border tensions.
Pak warned of unpredictable, unstable times ahead as the world does not know what has motivated Pyongyang’s recent behavior.
Reference: CNBC, Reuters, FXStreet
Thai
Eng