· Dollar bides time ahead of U.S. manufacturing, jobs data
The dollar held steady against the euro on Wednesday ahead of data expected to show U.S. manufacturing activity and hiring continued to recover from the economic shock caused by the coronavirus pandemic.
The euro was hemmed into a narrow range as traders awaited data on Germany’s manufacturing sector, retail sales, and the jobless rate to gauge the health of the eurozone economy.
The yen firmed slightly on safe-haven flows after a top government spokesman said Japan could re-impose a state of emergency in response to the coronavirus.
A surge in new infections in the U.S. south and southwest has worried some market participants, but most investors are betting this will not be enough to derail a broader rebound in the global economy.
“The dollar will be supported against the yen if U.S. economic data are positive, but U.S. yields are not rising much because of speculation about yield curve control,” said Shusuke Yamada, head of foreign exchange and Japan equity strategy at Merrill Lynch Japan Securities.
“The euro looks stable, but there are questions about Brexit and the pace of economic reopening, which means the euro could soon be overvalued.”
The euro EUR=D3 held steady at $1.1223. Against the British pound, the common currency EURGBP= traded at 90.77 pence following a 0.9% decline on Tuesday.
The yen edged up to 107.63 per dollar JPY=, pulling back from a three-week low.
The yen barely reacted after Bank of Japan data showed business sentiment fell to an 11-year low.
Sterling GBP=D3 bought $1.2367, surrendering some of the previous day's gains due to worries about Britain's trade negotiations with the European Union.
The U.S. Institute for Supply Management’s purchasing managers’ index (PMI) for manufacturing due later on Wednesday is forecast to show that activity in June continued to recover from an 11-year low marked in April, when the coronavirus paralysed large swathes of the global economy.
Investors also await the closely-watched U.S. nonfarm payrolls report on Thursday, which is expected to show the economy added 3 million jobs in June.
The onshore yuan CNY=CFXS was little changed at 7.0654 per dollar after the People's Bank of China cut the re-discount and re-lending rates to reduce funding costs for small firms.
Some investors are wary of diplomatic tensions over Beijing’s new security law for the former British colony of Hong Kong, which came into effect on Wednesday.
· ECB ready to adapt policy to coronavirus but reforms key to recovery: de Guindos
The European Central Bank is ready to adapt its policy to the needs of the European Union after the coronavirus pandemic, but reforms by single countries will be more important than monetary policy, the bank’s Vice President Luis de Guindos said on Tuesday.
“The main antidote will not be monetary policy - which we will conduct, knowing that we are not omnipotent - but rather reforms and budgetary policy of single governments,” de Guindos told Italian daily La Stampa in an interview.
· German retail sales rebound in May as lockdown lifted
German retail sales rose sharply in May, data showed on Wednesday, reflecting a rebound in private consumption as Germany lifted restrictions imposed to stop the spread of the coronavirus.
Retail sales rose by 13.9% on the month in real terms after a downwardly revised drop of 6.5% in April, data from the Federal Statistics Office showed. A Reuters forecast had predicted a 3.9% increase.
On the year, retail sales rose by 3.8% in real terms after a decrease of 6.4% in the previous month.
Fear of catching the coronavirus kept many consumers away from stores, which translated into a massive increase in online sales, the data showed.
· UK house prices fall for first time since 2012: Nationwide
Britain’s house prices fell in annual terms for the first time since 2012 in June as the country reeled from the coronavirus shock to the economy, mortgage lender Nationwide said on Wednesday.
Nationwide said its measure of house prices fell by 0.1% compared with June of last year.
In monthly terms, prices fell by 1.4%, not as steep as May’s 1.7% fall, which was the biggest drop in more than 11 years.
A Reuters poll of economists had pointed to an annual rise of 1.0% and a monthly fall of 0.7%.
· Asia's factory pain eases as region emerges from pandemic
Asia’s factory pain showed signs of easing in June, as a rebound in China’s activity offered some hope the region may have passed the worst of the devastation caused by the coronavirus pandemic.
But sluggish global demand and fears of a second wave of infections will tame any optimism on the outlook and keep pressure on policymakers to support their ailing economies.
A series of business surveys released on Wednesday showed broad improvements in manufacturing across Asia in June from the depths hit in April and May. Activity in some economies swung to growth while declines in other places slowed.
· Japan's new auto sales skid 23% year-on-year in June: industry data
Japanese new auto sales dropped by nearly a quarter in June from a year earlier as consumers continued to hit the brakes on car purchases in the wake of the coronavirus outbreak, industry association data showed on Wednesday.
Total vehicle sales fell 23% in June from the same month a year earlier to 347,371 units, according to data from the Japan Automobile Dealers Association and an association for dealers of Japan’s “kei” mini cars.
· Hong Kong police fire water cannon to disperse national security law protesters
Hong Kong police used water cannon on Wednesday to disperse activists protesting against Beijing’s new national security legislation for the Chinese-ruled city that critics fear will crush freedoms in the global financial centre.
· South Korea's Moon calls for U.S.-North Korea leaders' summit before U.S. election
South Korean President Moon Jae-in said U.S. President Donald Trump and North Korean leader Kim Jong Un should meet again before the U.S. presidential election in November, a Seoul official told reporters on Wednesday.
· Oil rises after sharp drop in U.S. crude inventories
Oil prices rose on Wednesday after an industry report showed crude inventories in the United States fell much more than expected, suggesting demand is improving even as the coronavirus outbreak spreads around the world.
Brent crude rose 33 cents, or 0.8%, to $41.60 a barrel by 0044 GMT after declining more than 1% on Tuesday. U.S. crude was up 42 cents, or 1.1%, at $39.69 a barrel, having dropped by 1.1% in the previous session.
U.S. crude and gasoline stocks declined more than expected last week, while distillate inventories rose, data released by the American Petroleum Institute (API) late on Tuesday showed. [API/S]
Crude inventories dropped by 8.2 million barrels to 537 million barrels, against analysts’ forecasts for a draw of 710,000 barrels.
Reference: CNBC, Reuters
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