· Dollar stumbles as investors await U.S. stimulus breakthrough
A rebound in the dollar faltered on Tuesday as political wrangling over a U.S. relief plan and the gloomy economic outlook kept investors shy of the currency.
After its worst month in a decade in July the greenback started August on a firm note as some investors trimmed their short positions, pushing the currency as high as $1.1695 per euro on Monday, 1.8% above last week’s two-year low.
However, that only carried it so far, and it settled back to $1.1766 in Asia on Tuesday, while the yen and other majors also lifted from troughs. The Aussie edged ahead to $0.7134 after the central bank offered no surprises by holding policy steady.
Despite an encouraging slowdown in new virus cases and better-than-expected manufacturing data, investors are reserving judgment on whether a U.S. economy with 30 million people out of work can really lead the world’s recovery.
Elsewhere the yen was stable at 106.04 per dollar while the pound hung on to most of July’s gains on the greenback at $1.3079. The New Zealand dollar was flat at $0.6612.
Elevated Sino-U.S. tension kept the yuan on the weaker side of 7-per-dollar at 6.9806 in onshore trade.
· Fed's Bullard: Recovery looks to have slowed in July, no smooth track ahead
The U.S. economic recovery from the coronavirus recession likely slowed in July after surprising to the upside in May and June, and the trajectory from here is unlikely to be smooth, St. Louis Federal Reserve Bank President James Bullard said on Monday.
Bullard, in a presentation during an online event hosted by the St. Louis Fed’s Memphis, Tennessee, branch, said it appears as though the trough in economic activity occurred in April.
· Fed's Barkin says economy faces 'sinkhole' without more fiscal support
The U.S. economy faces a much larger downturn than previously forecast if Congress is unable to provide longer-term fiscal support quickly to tens of millions of Americans who are currently jobless, Richmond Fed President Thomas Barkin said on Monday.
“Four months ago, when we did the first stimulus, we thought the economy faced a pothole and the stimulus put a plate over it so we could navigate. Now escalation of the virus may be making that pothole into a sinkhole and creating a need for a longer plate,” Barkin said in webcast remarks to the Northern Virginia Chamber of Commerce. “If Congress takes support away too abruptly ... the unemployed, their landlords, the places they shop will then feel the full brunt.”
U.S. central bank officials have become increasingly pessimistic about the short-term outlook for the economy amid a resurgence in coronavirus infections across the country and continuing deadlock in Congress on passing a new relief bill.
· Strain on global manufacturing eases as euro zone returns to growth
Euro zone manufacturing activity expanded modestly last month, its first growth since early 2019, and Asia’s pain eased as the contraction slowed in export-reliant nations, adding to hopes the sector is emerging from the hit of the coronavirus pandemic.
Still, while the euro zone economy contracted a record 12.1% last quarter, a Reuters poll predicted 8.1% growth during the current one.
Factories appear to be playing their part in the bloc’s potential recovery, and IHS Markit’s final Manufacturing Purchasing Managers’ Index bounced to 51.8 in July for the euro zone from June’s 47.4 - its first time above the 50 mark separating growth from contraction since January 2019.
Manufacturers in Germany, Europe’s largest economy, saw an expansion for the first time since December 2018 and in France activity picked up a touch.
· Germany's car industry shows initial signs of recovery: Ifo
Germany’s car industry is showing initial signs of picking up and carmakers expect their exports to increase, a survey published by the Ifo economic institute showed on Tuesday.
Business expectations, demand and order books all improved last month, Ifo said, but it cautioned that the survey’s indicator for the current business situation was still negative in July.
· China only fulfils 5% of Sino-U.S. energy trade deal in first half of 2020
China bought only 5% of the targeted $25.3 billion in energy products from the United States in the first half of 2020, falling well short of its trade deal commitments at a time when relations between the two top economies are already sour.
China’s imports of crude oil, liquefied natural gas (LNG), metallurgical coal and other energy products totalled around $1.29 billion this year through June, according to Reuters calculations based on China customs data.
While Chinese purchases of U.S. products accelerated recently, analysts say weak energy prices and worsening relations means Beijing may undershoot its full-year goal in the Phase 1 deal agreed in January.
· Taiwan July exports seen falling again for fifth straight month: Reuters poll
Taiwan’s exports likely fell 0.22% in July, down for a fifth straight month though at a slower pace as the COVID-19 pandemic hit global demand for the island’s electronic goods, according to the median forecasts of 14 analysts polled by Reuters.
Taiwan is one of Asia’s major exporters, especially of technology goods, and its export trend is a key gauge of global demand for technology gadgets worldwide. Its largest trading partner is China.
Forecasts ranged widely from a decline of 4.5% to a growth of 3% in the midst of uncertainties over the coronavirus outbreak that has disrupted global supply chains and hit the growth outlook for the island’s tech manufacturers.
Exports in June dropped 3.8% from a year earlier to $27.13 billion, falling for a fourth straight month.
· Oil prices fall as rising coronavirus case numbers cast shadow over fuel demand pickup
Oil prices slid on Tuesday amid concerns that a nascent recovery in fuel demand could stall as a fresh wave of COVID-19 infections around the world sparks tighter lockdowns just as major producers ramp up output.
U.S. West Texas Intermediate (WTI) crude futures fell 30 cents, or 0.7% to $40.71 a barrel at 0414 GMT, while Brent crude futures fell 37 cents, or 0.8% to $43.78 a barrel.
The slide comes after WTI rose 1.8% and Brent climbed 1.5% on Monday on better-than-expected data on manufacturing activity in Asia, Europe and the United States showing factories were emerging from the worst of the early coronavirus pandemic impact.
Reference: CNBC, Reuters
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