• MTS Economic News_20190611

    11 Jun 2019 | Economic News

· The dollar held above a recent two-and-a-half-month low on Tuesday as bets on an interest rate cut by the Federal Reserve increased, although investors were wary of selling aggressively before a Group of 20 summit this month.
Markets are only pricing in about a 20% chance of a rate cut in June, but they are pricing in about 100% chance of a cut by July. A policy meeting is due next week.

Against a basket of other currencies, the dollar was steady at 96.80, near a late March low of 96.46. It has fallen 1% so far this month.

· Recent dovish comments from Fed officials and weak economic data have bolstered expectations for rate cuts. But markets are also looking to a G20 meeting in Osaka, Japan, on June 28-29.

U.S. President Donald Trump said on Monday he was ready to impose more tariffs if talks at the summit with China’s president, Xi Jinping, make no progress.

· The U.S. economy may be pushed into a “Trump recession” if Washington follows through on its threat to impose new tariffs on billions of dollars worth of Chinese goods, the president and CEO of a U.S.-based trade organization said Tuesday.

Speaking to CNBC at the CES Asia technology conference in Shanghai, Gary Shapiro from the Consumer Technology Association called tariffs an “economic fence” and said they are “not a good strategy” to help Washington resolve its trade dispute with Beijing.

“They are taxes, they hurt consumers, they hurt American companies,” Shapiro said, noting that positive assessments of U.S. President Donald Trump’s hard-line tariff approach are not widely held by economists outside the White House.

· A leadership contest has kicked off in the U.K. after the resignation of beleaguered Prime Minister Theresa May and it looks like former Foreign Secretary and London Mayor Boris Johnson – a politician known for having a sharp wit as much as for his gaffes – could be the next leader of the country.

· The self-governed island — which Beijing deems to be a renegade Chinese province — is one of many flashpoints in the rivalry between the world’s two superpowers.

Taiwan has always been a “chess piece” that Washington can play with in U.S.-China relations, said Zhiqun Zhu, a professor of political science and international relations at Bucknell University.

On the military front, the Trump administration has ramped up arms sales to Taipei over the years, invoking the ire of Beijing. Washington is reportedly preparing a sale of more than $2 billion worth of tanks and weapons to Taiwan.

Chinese Foreign Minister Lu Kang said Beijing is “strongly dissatisfied” with and “resolutely opposed” to any official meetings between the U.S. and Taiwan.

“I believe we’re inching closer & closer to Beijing’s redline on US-Taiwan senior official mtgs--those that are publicized at least,” Derek Grossman, a senior defense analyst at California-based think tank RAND Corporation, said on Twitter after the U.S.-Taiwan meeting.

Taiwan is set to have its presidential elections in January 2020 — and experts said the polls would likely determine the direction of cross-strait ties.

Grossman said that if the incumbent Taiwanese president Tsai Ing-Wen is re-elected, which is “likely,” cross-strait tensions are likely to escalate further from 2020 to 2024.

According to Grossman, the best hope for keeping tensions under wraps would be if a candidate from the opposition Kuomintang (KMT) party wins the next Taiwan presidential race and recognizes the “One China” policy.

· Oil prices rose on Tuesday in line with firmer financial markets and bolstered by expectations that producer group OPEC and its allies will keep withholding supply.

Front-month Brent crude futures were at $62.56 at 0707 GMT, up 27 cents, or 0.4%, from Monday’s close.

U.S. West Texas Intermediate (WTI) crude futures were at $53.75 per barrel, 49 cents, or 0.9%, above their last settlement.

Prices fell by around 1% in the previous session and crude futures are down by some 20% from their 2019 peaks in late April, dragged lower by a widespread economic downturn that has started to impact oil consumption.

Traders said crude oil futures on Tuesday were pushed up by a broader lift in financial markets after Beijing eased financing rules to stem an economic downturn.

Reference: Reuters, CNBC

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