· Safe-haven dollar hits one-month low on vaccine hopes
Risk sentiment revived in currency markets on Wednesday as progress toward a COVID-19 vaccine helped equities rebound and commodity currencies strengthen, pushing the dollar to a one-month low.
The dollar index =USD fell below 96 for the first time since June, dropping to a one-month low of 95.770. It pared some of those losses in afternoon trade, last down 0.09% to 96.070.
U.S. company Moderna (MRNA.O) has produced an experimental COVID-19 vaccine that provoked immune responses in all 45 volunteers, sparking markets’ risk-on mood.
But there was still some cause for caution, with worsening U.S.-China tensions and fears about the economic impact of a second wave of coronavirus in the United States.
The euro EUR= rose to a four-month high of $1.145 versus the dollar, close to the euro-dollar's peak of $1.150 in early March. It was last up 0.11% at $1.141.
· Fed’s Beige Book sees increase in economic activity but nothing near pre-pandemic levels
The outlook: Economic activity increased in almost all districts, but remained well below where it was prior to the COVID-19 pandemic, according to the Federal Reserve’s Beige Book report released Wednesday. Business contacts remain highly uncertain about the outlook for the U.S. economy, as it was unclear how long the crisis would last.
What happened: While employment increased, there was also talk about new layoffs across the U.S. And firms that had retained workers with the help of the government’s Paycheck Protection Program said the strength of the economy would determine whether they can avoid layoffs.
Consumer spending was led by a rebound in vehicle sales and home improvement. Manufacturing moved up but from a very low level. Demand for services was very weak.
Big picture: The Beige Book was more positive than the prior report in May but there was no sense that the economy is out of the woods.
· June retail sales should be strong from a pickup in spending before new virus outbreak slowed activity
Retail sales in June are expected to have gained 5.2% as the economy reopened, but sales could have trailed off towards the end of the month as the virus outbreak worsened.
According to Dow Jones, economists expect sales rose 5% when excluding vehicle sales. May sales jumped by a surprising 17.4%, and 17.2% excluding automobiles, as states first reopened their economies.
Mark Zandi, chief economist at Moody’s Analytics, said he expects sales increased by 6%, and he said business spending data collected by software firm Cortera confirms that it was strong. Cortera analyzes business to business spending, and it is a barometer for spending activity by consumers.
“The strongest categories were a big increase in clothing stores, furniture, electronics and appliance stores and sporting goods stores,” he said.
However, he said in hot-spot states, spending clearly slowed toward the end of the month, as there were fewer restaurant bookings.
· New Jersey governor says state economy will be recovering from virus ‘for years’
New Jersey Gov. Phil Murphy said Wednesday that the recovery from the coronavirus-induced recession will take years for his state and urged the federal government to provide fiscal relief for state and local governments.
· Fauci calls White House criticism of him bizarre, says 'let's stop this nonsense' and fight coronavirus
U.S. infectious disease expert Anthony Fauci on Wednesday called the White House effort to discredit him “bizarre” and urged an end to the divisiveness over the country’s response to the coronavirus pandemic, saying “let’s stop this nonsense.”
Fauci, who has become a popular and trusted figure during the coronavirus outbreak, came under criticism from President Donald Trump and some of his Republican allies as Fauci cautioned against reopening the U.S. economy too soon.
The recent spike in coronavirus infections, primarily in states that were among the earliest to lift coronavirus restrictions, put Fauci on a collision course with the White House.
· Pompeo imposes visa restrictions on Huawei, other Chinese tech companies, citing human rights abuses
Secretary of State Mike Pompeo said Wednesday the United States will impose visa restrictions on Chinese technology firms, the latest move expected to strain relations between Washington and Beijing.
“State Department will impose visa restrictions on certain employees of Chinese tech companies like Huawei, that provide material support to regimes engaging in human rights violations and abuses globally,” Pompeo said.
The secretary of State described Huawei as “an arm of the Chinese Communist Party’s surveillance state that censors political dissidents and enables mass internment camps in Xinjiang and the indentured servitude of its population shipped all over China.”
He accused certain employees of the company of providing “material support to the Chinese Communist Party regime that commits human rights abuses,” but he didn’t offer specifics on the employees.
· Bank of Canada sees economy below pre-COVID levels until 2022, with rates remaining low
Canada’s economic activity will not return to pre-pandemic levels until 2022 and interest rates will remain low for at least two years, the Bank of Canada said on Wednesday, as it again held its key overnight rate steady.
The central bank sees a long, slow recovery and will keep its quantitative easing programs in place until that recovery is “well under way,” Bank of Canada Governor Tiff Macklem told reporters after the decision.
The central bank said it would leave interest rates on hold until the 2% inflation target is sustainably achieved, which it does not expect until at least 2023.
Macklem later told Bloomberg the bank’s outlook implied its key overnight rate would likely stay at its effective lower bound of 0.25% for “at least two years.”
The Bank of Canada released a central scenario earlier on Wednesday that showed U.S. real gross domestic product falling 8.1% in 2020 and rising 3.4% in 2021. Canada GDP is projected to fall 7.8% in 2020, then rise 5.1% in 2021, and reach pre-pandemic levels in early 2022.
· Oil jumps more than 2% on surprise U.S. inventory draw
Oil prices rose more than 2% on Wednesday, supported by a sharp drop in U.S. crude inventories, but further gains were limited as OPEC and its allies are set to ease supply curbs from August as the global economy gradually recovers from the coronavirus pandemic.
Brent crude was up 75 cents, or 1.75%, at $43.65 a barrel, and West Texas Intermediate crude rose 91 cents, or 2.26%, to settle at $41.20 per barrel.
Prices were boosted after data from the Energy Information Administration showed U.S. crude inventories fell 7.5 million barrels last week, compared with analysts’ expectations in a Reuters poll for a 2.1 million-barrel drop.
Reference: CNBC, Reuters, Market Watch, Worldometers
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