· The safe-haven yen and Swiss franc retreated against the dollar on Monday, as risk sentiment gradually improved after a week of turmoil on hopes that major central banks would look to launch fresh stimulus measures to lift their sluggish economies.
The Japanese currency fell for a third straight session versus the greenback, while the Swiss unit slid to a two-week low against the dollar.
Optimism about government action to avert recession concerns in the United States, which was triggered U.S. Federal Reserve’s symposium in Jackson Hole, Wyoming, toward the end of the week, where central bankers could announce key measures.
China also unveiled interest rate reforms expected to lower corporate borrowing costs, which helped lift the market’s mood, while the prospect of Germany’s coalition government ditching its balanced budget rule to take on new debt and launch stimulus steps also boosted risk appetite.
In morning trading, the dollar rose 0.1% against the yen to 106.51 yen, helping push the dollar index trade higher on the day to 98.239. The euro was up versus the greenback at $1.1101, after falling 1% last week, its biggest weekly drop since early July.
· U.S. government debt yields climbed on Monday as a more positive market and economic outlook goaded investors back into riskier assets.
The yield on the benchmark 10-year Treasury note rose 6 basis points to 1.6% while the rate on Treasurys maturing in two years rose 5 basis points to 1.541%. The yield on the 30-year Treasury bond, which hit new all-time lows last week, was also higher at 2.083%.
The spread between the 2-year Treasury yield and that of the 10-year inverted in intraday trading on Wednesday for the first time in over a decade, a sign many consider a reliable recession indicator. That portion of the yield curve steepened on Monday and was last seen positive at 8 basis points.
Market focus is largely attuned to global central banks, as hopes of more stimulus from major economies such as China and Germany soothed investors’ concerns about a global economic downturn.
· British Prime Minister Boris Johnson and U.S. President Donald Trump discussed Brexit and a U.S.-Britain free trade deal during a phone call on Monday ahead of a Group of Seven summit in France this weekend.
· Prime Minister Boris Johnson called on France and Germany on Monday to change their position on Brexit and negotiate a new exit deal for Britain, reiterating his stance that he is ready to leave the European Union without a deal if they do not.
· Oil prices gained roughly 2% on Monday after a weekend attack on a Saudi oil facility by Yemen’s Houthi forces threatened crude supplies and as traders looked for signs that top economies would take measures to counteract a global slowdown.
Brent crude LCOc1, the international benchmark for oil prices, settled at $59.74 a barrel, rising $1.10, or 1.88%.
U.S. West Texas Intermediate (WTI) crude futures CLc1 settled at $56.21 a barrel, up $1.34, or 2.44%.
Signs of a slight softening of the trade war between the United States and China, including Washington extending a reprieve that permits China’s Huawei Technologies HWT.UL to buy components from U.S. companies, also helped oil prices.
· An escalating trade war between the world’s two largest economies is negatively impacting the outlook for U.S. crude shipments, energy analysts have warned, amid fears that China could soon dramatically reduce its intake of American oil.
Trade tensions between Washington and Beijing prompted some external observers to warn the outlook for China-bound U.S. crude shipments was firmly skewed to the downside.
Reference: CNBC, Reuters
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