· Dollar buoyed by upbeat U.S. economic data; Aussie falls
The dollar bounced off two-year lows on Wednesday as U.S. data pointed to a firm manufacturing activity, while the euro retreated from its highest levels since 2018 on profit-taking.
Economic data published on Tuesday showed U.S. manufacturing activity accelerated to a nearly two-year high in August amid a surge in new orders, with the reading from the Institute for Supply Management highest level since November 2018.
The U.S. data followed similarly upbeat Chinese and European manufacturing indicators.
Analysts said that an increase in pent-up demand has contributed to the rise in the greenback.
The dollar index =USD inched up 0.16% at 92.390, having hit its lowest since April 2018 of 91.737.
Separate data from the Australian Bureau of Statistics showed Australia suffered its worst economic fall in quarterly domestic product on record last quarter as the coronavirus pushed the country into recession.
Following the data announcement, the Australian dollar AUD=D3 fell 0.5% to $0.7348 before retracing some losses at $0.73560.
The euro benefited from the initial dollar sell-off, as it rose high as $1.2014 EUR=EBS on Tuesday, its highest since May 2018.
The common currency later reversed those gains to sit at $1.19085.
Against the Japanese yen JPY=EBS, the dollar was little changed at 106.075 yen.
Japan’s Liberal Diplomatic Party formally decided to hold election of Sept. 14, sources told Reuters, but analysts say the market has already priced in the risk.
Also supporting a rebound in the greenback, White House chief of staff Mark Meadows said Senate Republicans are likely to bring up a targeted COVID-19 relief bill next week.
Elsewhere in the market, Sterling GBP=D3 traded at 1.3379, just below last year's high that followed the 2019 election of 1.3516.
The Chinese yuan CNH=EBS was little changed, last down 0.08% in offshore markets to 6.8305.
· Treasury yields move higher ahead of employment data and Beige Book report
U.S. government debt prices moved lower Wednesday morning as investors awaited fresh employment data.
At around 2:20 a.m. ET, the yield on the benchmark 10-year Treasury note rose to 0.6803% while the yield on the 30-year Treasury bond moved higher to 1.4388%. Yields move inversely to prices.
· Pelosi says 'serious differences' between Democrats, White House on coronavirus aid
U.S. House Speaker Nancy Pelosi said after a phone call with Treasury Secretary Steven Mnuchin on Tuesday that “serious differences” remain between Democrats and the White House over coronavirus relief legislation.
“Sadly, this phone call made clear that Democrats and the White House continue to have serious differences understanding the gravity of the situation that America’s working families are facing,” Pelosi said in a statement.
No negotiations on another round of coronavirus aid have taken place since early August, when talks collapsed as congressional Democrats and the Republican Trump administration could not bridge a gap of more than $1 trillion between their proposed relief packages for small businesses, state and local governments, school districts and healthcare providers.
“In our conversation, I reiterated the hope that Republicans will come to the table and work with Democrats to save the lives and livelihoods of the American people,” Pelosi said.
In mid-May, House Democrats approved a fifth coronavirus-response bill this year totaling more than $3 trillion. Months later, Senate Republican leader Mitch McConnell responded with a $1 trillion bill that the Senate has not voted upon.
· U.S. seeks Mexico talks over perishable imports in bid to bolster U.S. farmers
The Trump administration on Tuesday announced plans to seek senior-level talks with Mexico over imports of perishable fruits and vegetable as part of a broader series of actions meant to bolster U.S. farmers, raising the possibility of future tariffs.
The Office of the U.S. Trade Representative (USTR) also will request that the U.S. International Trade Commission initiate a Section 201 global safeguard investigation to review “the extent to which increased imports of blueberries have caused serious injury to domestic blueberry growers.”
If the commission finds injury, the U.S. government could impose tariffs on products to help domestic growers.
· Weak German retail sales dash hopes for strong recovery
German retail sales fell unexpectedly on the month in July, data showed on Wednesday, dashing hopes that household spending in Europe’s largest economy will be powerful enough to drive a strong recovery in the third quarter from the coronavirus shock.
Retail sales were down by 0.9% on the month in real terms after a revised drop of 1.9% in June, calendar-adjusted data from the Federal Statistics Office showed.
This missed a Reuters forecast for a 0.5% increase, though retail sales are a volatile indicator often subject to revision.
The picture was a bit brighter when looking at the development over the past 12 months.
On the year, retail sales rose by 4.2% in real terms after an upwardly revised increase of 6.7% the previous month, the data showed.
· BOJ's Wakatabe hails Fed's new target as 'historical' decision
The U.S. Federal Reserve’s adoption of an average inflation target is a “historical” decision but more time is needed to gauge the impact on other central banks’ policies, Bank of Japan Deputy Governor Masazumi Wakatabe said on Wednesday.
“The Fed has set a new target. But for monetary policy, there is always the question on what tools and communication means a central bank has to achieve its goal,” Wakatabe told an online news conference.
· Japan's Suga expected to announce candidacy for PM race
Suga, a longtime aide to Prime Minister Shinzo Abe, has privately indicated his intention to stand for leader of the ruling Liberal Democratic Party (LDP), a source told Reuters earlier. The party’s leader is set to take over as prime minister given its majority in the lower house of parliament.
Japan's Suga says to brief on party leadership race, in signal he intends to run
Japan’s Chief Cabinet Secretary Yoshihide Suga said he would hold a briefing on the ruling party’s leadership election later on Wednesday, all but confirming plans to announce his candidacy in a race he is widely expected to win
· Japan's Kishida says can show strength in economic, foreign policy fields
Japanese ruling party heavyweight Fumio Kishida, who has declared his candidacy for the party leadership, said on Tuesday he can show strength in the economic and foreign policy fields and he wants to be a leader who listens to the people.
Kishida, policy chief of the ruling Liberal Democratic Party (LDP), also said Japan must focus on challenges such as poverty and social disparity.
· India accuses China of more ‘provocative actions’ at mountain border
India’s foreign ministry on Tuesday accused Chinese troops of taking “provocative actions” on the disputed Himalayan mountain border while commanders from both sides were holding talks on Monday to defuse tensions between the Asian giants.
“Due to timely defensive action, the Indian side was able to prevent these attempts from unilaterally altering the status quo,” ministry spokesman Anurag Srivastava said in a statement.
· Australia records worst economic slump as pandemic ends golden run
Australia fell into its deepest economic slump on record last quarter as coronavirus curbs paralysed business activity, while fresh outbreaks threaten to upend any immediate recovery, piling pressure on the government to keep fiscal taps open.
Data from the Australian Bureau of Statistics on Wednesday showed the country’s A$2 trillion ($1.47 trillion) economy shrank 7% in the three months to end-June from a 0.3% decline in the March quarter.
The country joins the United States, Japan, UK and Germany in technical recession, defined as two straight quarters of decline, in Australia’s first such downturn since 1991.
· Australia's 'hot spot' state reports lowering new infections, may ease restrictions
A second wave of infections in Australia’s coronavirus hot spot, the state of Victoria, eased further on Wednesday as authorities look to loosen lockdown restrictions that have shut large swathes of the state’s economy.
Australia’s second-most populous state reported 90 new coronavirus cases, its third straight day of double-digit new cases, indicating the strict lockdown measures are reducing the infection rate.
Last month daily new infections peaked at more than 700.
· Oil gains on U.S. stock draw, economic recovery optimism
Crude oil futures extended gains on Wednesday after a bigger-than-expected draw in U.S. crude stockpiles and as solid U.S. and Chinese factory activity fuelled optimism of a recovery from the coronavirus pandemic, boosting investor risk appetite.
Brent crude LCOc1 futures rose 45 cents to $46.03 a barrel as of 0559 GMT, climbing for a third day.
U.S. West Texas Intermediate futures CLc1 rose 43 cents to $43.19, following the previous day’s gain of 15 cents.
U.S. crude inventories fell by 6.4 million barrels in the week to Aug. 28 to 501.2 million barrels, the American Petroleum Institute (API) said, against analysts’ expectations for a draw of 1.9 million barrels.
Reference: CNBC, Reuters
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