Dollar steady after U.S. tariffs kick in
By Shinichi Saoshiro
The dollar stood little changed against its peers on Friday and investor caution prevailed with U.S. tariffs on Chinese goods taking effect and market participants turning their attention to the closely-watched U.S. jobs report due later in the day.
The first salvos of a trade conflict between the world’s biggest economic powers were fired on Friday with U.S. tariffs on $34 billion in Chinese goods coming into effect.
But the immediate response among major currencies was limited.
The dollar index against at basket of six major currencies was mostly steady at 94.388 (DXY) after slipping to 94.177, its lowest since June 26, the previous day.
“Participants will be looking to shift their attention from trade matters to the U.S. non-farm payrolls and if the jobs report is strong, dollar/yen stands poised to rise and break out of its recent range,” said Yukio Ishizuki, senior currency strategist at Daiwa Securities in Tokyo.
The U.S. Labor Department is expected to report nonfarm payrolls increased 195,000 in June after surging by 223,000 in May. Monthly average hourly earnings likely rose 0.3 percent, which would lift the annual increase to 2.8 percent from 2.7 percent in May.
Stocks, euro rise as shots fired in U.S.-China trade war
By Saikat Chatterjee
The imposition of tariffs by the United States and China on billions of dollars of trade was absorbed calmly by markets on Friday with stocks edging higher and the euro climbing a three-week peak, but concerns about the conflict escalating capped gains.
U.S. tariffs on more than 800 goods from China worth $34 billion took effect at 0401 GMT while China’s commerce ministry said in a statement shortly after the deadline passed that it was forced to retaliate, meaning $34 billion worth of imported U.S. goods including autos and agricultural products also faced 25 percent tariffs.
MSCI’s main European Index edged 0.1 percent higher and held below a two-week high hit in the previous session amid hopes of a rapprochement between the U.S. and Europe on auto trade tariffs.
The euro took cues from broadly firmer stocks and rose 0.1 percent on the day to a fresh three-week high at $1.1727 with broadly strong German industrial data this week also boosting demand for European stocks.
To be sure, signs of nervousness were evident in markets with the Japanese yen and the Swiss franc firm against the dollar while core U.S. and German bonds in demand.
U.S. crude stood 0.2 percent higher at $73.09 a barrel. Brent crude was almost flat at $77.42 per barrel.
Pound Investors Fear Currency Slide If May Leadership Challenged
By Charlotte Ryan
It’s not just Theresa May who’s worried about being toppled.
Pound investors say the resurgent threat of Conservative party turmoil is one more reason to avoid the U.K. currency. Amid reports that the British Prime Minister faces ministerial resignations if she fails to achieve a solution to a Brexit deadlock, strategists warn sterling could fall as low as $1.25 if she is ousted in a leadership challenge.
Ahead of May’s cabinet meeting on Friday, Brexit Secretary David Davis has reportedly rejected attempts at a compromise over customs arrangements and Chancellor Angela Merkel’s government is also said to be unconvinced by the proposal. That news erased gains made by the pound earlier on Thursday after comments by Bank of England Governor Mark Carney.
If May manages to unite her cabinet behind a Brexit strategy which is also palatable to the European Union, sterling could see a short-covering rally up to $1.34, according to Kenneth Broux, a strategist at Societe Generale SA.
On the other hand, under a worst-case scenario in which the prime minister is ousted by ardent Brexiteers and replaced with a hard Brexit candidate, sterling would fall to as low as $1.25, said Mizuho’s Jones.
Germany’s massive trade surplus ‘is becoming toxic’
By Holly Ellyatt
Germany exporting more than it imports is becoming a big problem for its economy, a director from the country’s closely-watched Ifo Institute said Wednesday.
Germany’s export-orientated, manufacturing economy and its resulting trade surplus — the value of its exports exceeding that of its imports — has long been a subject of criticism and Berlin has been pressured to encourage more domestic spending and boost imports.
Trade surpluses are viewed as encouraging trade protectionism and worsening the economic problems of other countries.
Hiring seen strong in June with plenty of jobs for grads
By Patti Domm
Employers may be having a hard time finding workers, but recent graduates and students may be helping fill the ranks this summer and that trend could have bumped up June’s job growth.
Job growth in June is expected at 195,000 and the unemployment rate was expected to remain unchanged at 3.8 percent, according to Reuters.
Markets will no doubt be most interested in wage growth, expected at a monthly gain of 0.3 percent, or an annual gain of 2.8 percent, a respectable pace. Economists expect that tightness in the job market to start pressuring wage growth at some point, but it’s been tame so far, signaling little inflationary pressure and therefore no reason for the Fed to increase its pace of interest rate hikes.
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