· The dollar slipped against most major currencies on Tuesday, hitting a three-month low versus the euro, as expectations of multiple decreases of U.S. interest rates by the Federal Reserve have spurred selling of the U.S. currency.
Growing tensions between Iran and the United States stoked fresh safe-haven buying of yen, which reached its strongest levels against the greenback since early January.
Traders await fresh clues on the Fed’s stance on possible rate cuts, starting as soon as next month.
The dollar index moved further away from its 200-day moving average at 95.995. Investors are monitoring whether U.S. President Donald Trump and Chinese President Xi Jinping will at least call a truce in their trade war when they meet at a summit of the G20 major economies in Osaka, Japan, later this week.
The dollar was down 0.14% at 107.13 yen after hitting 106.78 yen during Asian trading, which was its weakest since Jan. 3.
On the other hand, the euro was down 0.12% at $1.1384.
The single currency retreated from $1.1412 earlier Tuesday, which was its highest since March 21.
· The yield on the benchmark 10-year Treasury note fell below 2% on Tuesday as investors looked for safety following the release of much weaker-than-expected confidence data.
Short-term rates rose off their lows, however, following comments from St. Louis Federal Reserve Bank President James Bullard and Chairman Jerome Powell.
The yield traded at 1.994% as of 3:33 p.m. ET. The 2-year rate held steady at 1.736% while the 30-year bond yield declined to 2.52%.
The Conference Board’s consumer confidence index fell to 121.5 in June, reaching its lowest level since September 2017. Conference Board senior director Lynn Franco said escalating trade fears appear to have “shaken consumers’ confidence.”
· President Donald Trump believes the U.S. dollar is too strong, and the euro is too weak, and feels the situation could be eased if the Federal Reserve lowered interest rates, a senior administration official said on Tuesday.
The official also said the White House had no plans to demote Fed Chairman Jerome Powell, adding that there were different views within the White House counsel’s office regarding the president’s authority to do so.
Trump, who is expected to underline U.S. economic gains in his 2020 re-election bid, has frequently blasted Fed policy and said other countries are using monetary polity to manipulate their currency and gain advantage in the global markets.
· Fed Chief Jerome Powell warns against policy bending to ‘short-term political interests’
Federal Reserve Chairman Jerome Powell stressed the central bank’s independence in a speech Tuesday that comes amid continuous pressure from the White House to cut interest rates.
He spoke during a event at the Council on Foreign Relations in New York that investors were watching closely for clues about the direction of monetary policy.
His remarks mirrored those from last week’s Federal Open Markets Committee meeting, and he emphasized that policy is under review though he did not overtly tip is hand that a rate cut is at hand. Markets are currently pricing in four quarter-point reductions by April 2020.
“Since the beginning of the year, we had been taking a patient stance toward assessing the need for any policy change,” he said. “We now state that the Committee will closely monitor the implications of incoming information for the economic outlook and will act as appropriate to sustain the expansion, with a strong labor market and inflation near its symmetric 2 percent objective.”
However, he emphasized that politics won’t be a consideration as the Fed is “grappling” with the idea of a rate cut.
“The Fed is insulated from short-term political pressures — what is often referred to as our ‘independence,’” Powell said in prepared remarks. “Congress chose to insulate the Fed this way because it had seen the damage that often arises when policy bends to short-term political interests. Central banks in major democracies around the world have similar independence.”
· The United States hopes to re-launch trade talks with China after President Donald Trump and President Xi Jinping meet in Japan on Saturday but Washington will not accept any conditions on tariffs, a senior administration official said on Tuesday.
The two sides could agree not to impose new tariffs as a goodwill gesture to get negotiations going, the official said, but it was unclear if that would happen.
The United States was not willing to come to the Xi meeting with concessions, said the official, who spoke on the condition of anonymity.
· Robert Mueller will publicly testify before two House committees next month about his probe into Russian efforts to interfere in the 2016 election.
· President Donald Trump slammed Iran on Tuesday, saying any Iranian attack on Americans would be met with “great and overwhelming force” and “obliteration.”
Trump’s comments on Twitter came a day after he announced fresh sanctions on the Islamic Republic in the wake of its downing of an unmanned U.S. drone last week.
Iranian President Hassan Rouhani responded to the new sanctions by calling them “outrageous and idiotic” and saying the White House was suffering from a “mental illness.”
· NATO said Russia must destroy its short-range nuclear-ready cruise missile system, or the alliance will be forced to respond.
The U.S. has previously said it will quit a decades-old missile treaty with Russia if the latter fails to destroy the missile, labeled the SSC-8 by NATO.
NATO has said the SSC-8 violates those terms and that Russia has been deploying the system at locations which could threaten countries across Europe.
· Boris Johnson, the favorite to become British prime minister, said he was prepared to lead Britain out of the European Union without a deal on Oct. 31 and said any EU attempt to impose trade tariffs would be akin to a Napoleonic-era blockade.
· British Foreign Secretary Jeremy Hunt, one of the two contenders to replace Prime Minister Theresa May next month, said on Tuesday he believed a Brexit deal could be done with the EU that would unite all wings of the Conservative party.
· Oil prices were mixed on Tuesday ahead of data expected to show U.S. crude stocks declining, outweighing investors’ concerns that U.S.-China trade tensions could dampen fuel demand.
Benchmark Brent crude futures settled up 19 cents, or 0.3%, at $65.05 a barrel.
U.S. crude futures fell 7 cents, or about 0.1%, at $57.83 a barrel.
Reference: CNBC, Reuters
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