Risk currencies recover after Navarro walks back China comments
The Australian dollar and other risk-sensitive currencies bounced back from sharp falls on Tuesday after White House trade adviser Peter Navarro said his comments that the trade deal with China was “over” were taken out of context.
U.S. President Donald Trump also chimed in, saying the Phase 1 trade deal struck with China in January was fully intact, quelling market concerns that Washington may be ditching the agreement.
The Australian dollar, which had fallen as much as 0.7%, turned positive on the day to last stand at $0.6922.
The offshore Chinese yuan pared much of its earlier losses to trade at 7.068 per dollar, down about 0.15% from late U.S. levels.
The safe-haven yen dropped 0.25% to 107.16 to the dollar.
“The market swings underscore how much the market is worried about possible deteriorations in U.S.-China relations,” said Ayako Sera, market economist at Sumitomo Mitsui Trust Bank.
Economists expect the euro zone composite flash PMI to rise to 42.4 in June from 31.9 last month as European economies gradually reopen.
Ahead of the data, the euro traded slightly firmer at $1.1274, extending its rebound from Monday’s low of $1.1168.
· White House scrambles to deny Trump trade adviser's claim that China deal is 'over'
The White House’s stance on China was thrown into confusion on Monday night after trade adviser Peter Navarro announced a trade deal between the two countries was “over”, only to be quickly contradicted by Donald Trump.
Navarro told Fox News the “turning point” came when the US learned about the coronavirus only after a Chinese delegation had left Washington following the signing of the phase one deal on 15 January.
“It was at a time when they had already sent hundreds of thousands of people to this country to spread that virus, and it was just minutes after wheels up when that plane took off that we began to hear about this pandemic,” said Navarro, one of the most outspoken critics of China among Trump’s senior advisers.
“It’s over,” he said.
But shortly after, the US president tweeted: “The China trade deal is fully intact. Hopefully they will continue to live up to the terms of the agreement!”
Navarro then said his comments had been taken out of context. “They had nothing at all to do with the phase one trade deal, which continues in place,” he said, and instead referred to “the lack of trust we now have in the Chinese Communist party”.
· U.S. plans to slap tariffs on aluminum imports from Canada: Bloomberg News
The United States is planning to re-impose tariffs on aluminum imports from Canada, Bloomberg reported late on Monday, citing people familiar with the matter.
If Canada declines to impose export restrictions, the United States will announce on Friday the re-imposition of 10% tariffs on aluminum from the country, the report said.
The tariffs would then be implemented by July 1, the report added, which is also when a new U.S.-Mexico-Canada (USMCA) trade agreement is expected to take effect.
Some industries, including automakers, had been asking for a delayed implementation of the agreement due to the difficulties they are facing amid the coronavirus pandemic.
The USMCA replaces the 26-year-old North American Free Trade Agreement between the three economies.
· Euro zone business activity rises in June, bolstering hopes of an economic recovery
Euro zone business activity continued to recover in June, according to data Tuesday, giving the latest indication of the region’s economic health as it emerges from the coronavirus pandemic.
Flash purchasing manager’s index (PMI) data — measuring activity in both the services and manufacturing sector in the euro zone — came in at 47.5 in June, up from a final reading of 31.9 in May. The 50-point mark separates contraction from expansion. Economists polled by Reuters had expected the flash June PMI to come in at 42.4.
The data gives markets another indication of the extent to which euro zone countries are recovering from lockdowns across the region that effectively saw whole industries shut down.
· EU presses China over trade, warns on Hong Kong law
The European Union told China on Monday to make good on a promise to open up its economy and warned of “very negative consequences” if Beijing goes ahead with a new security law on Hong Kong that the West says will curtail basic rights.
Speaking after video calls with Chinese Premier Li Keqiang and President Xi Jinping, the EU’s chief executive and chairman said they had repeated accusations that Beijing has spread disinformation about the coronavirus.
“The relationship between the EU and China is simultaneously one of the most strategically important and one of the most challenging that we have,” European Commission President Ursula von der Leyen told a news conference.
· Japan sticks to budget surplus goal despite spending boost
Japan remains committed to reaching a budget surplus in fiscal 2025, Finance Minister Taro Aso said on Tuesday, even as the heavily indebted nation has been forced to ramp up spending to offset the impact of the coronavirus outbreak.
When asked about a recent move by S&P Global Ratings to cut its outlook on Japan’s sovereign credit rating, Aso said the country could avert a ratings downgrade as long as its stimulus spending succeeds in reviving the economy.
“We have no immediate plan to review the primary budget goal,” Aso told reporters after a cabinet meeting.
The fiscal goal will be included in the government’s key mid-year policy platform, to be issued by Prime Minister Shinzo Abe’s top economic advisory council next month, which will focus more on promoting digitalisation and reopening of the economy.
· Oil prices steady after Navarro walks back from market-jolting comments
Oil prices steadied on Tuesday after a volatile session sparked by confusion over the status of the U.S.-China trade deal.
Markets were spooked by surprise comments from White House trade adviser Peter Navarro saying the hard-won deal was “over”, though assurances from President Donald Trump later that the agreement was fully intact soothed jangled nerves.
Brent crude fell 10 cents, or 0.2%, to $42.98 a barrel by 0649 GMT, after earlier skidding to a session low of $42.21. U.S. oil was down 16 cents, or 0.4%, at $40.57 a barrel, having dropped to a low of $39.76.
U.S.-China relations have reached their lowest point in years since the coronavirus pandemic that began in China hit the United States hard. President Trump and his administration have repeatedly accused Beijing of not being transparent about the outbreak.
He later issued a statement saying that he had been “speaking to the lack of trust” in the Chinese administration, the comments had been “taken wildly out of context” and the trade deal remains in place.
Reference: CNBC, Reuters
Thai
Eng