US-China: far from deal; US-France: new trade dispute; ECB to deliver more
Against the dollar, Thai baht on the previous trading day moved between 30.56-30.77 and closed weaker at 30.60.
Prolonging US-China tensions, President Trump said that China did not increase purchases of US farming goods as promised. Besides, Trump-Xi promise was not documented. Despite without further tariffs, the US and China are seemingly far from a trade deal.
Since France proposed to impose 3% tax on US giant tech firms, inclusive of Google, Apple, Facebook, and Amazon, the US would investigate this issue, while the EU hesitated to back France.
According to the minutes of Fed’s 18-19 June FOMC meeting recently released, a rate cut in the next meeting, 30-31 July, looks more possible since muted inflation as well as rising global downside risks towards the US economy were emphasized. In the meantime, a number of meeting participants suggested precautionary cuts, while some indicated that cuts were not yet needed soon.
Referred to the minutes of 5-6 June ECB’s monetary policy meeting just published, considerably aligned with the Fed, the ECB was ready and prepared to loosen policy on growing uncertainties and low market-based inflation expectations. ECB’s new round of stimulus as soon as in the next meeting, 25 July, became more likely.
After the S&P 500 index briefly reached 3,000 earlier, the Dow Jones Industrial index rallied and surpassed 27,000 on Fed’s dovishness. For the upcoming second-quarter earnings seasons, as much as 77% of the US companies issuing earnings guidance for the period issued negative projections, on account of trade retaliations and global growth concerns.
In addition, US June core CPI inflation was 2.1%, slightly above expectations, while headline CPI inflation kept declining to reach 1.6% in June. Meanwhile, China’s inflation remained at 2.7% in June, leveling anticipations.
After Japan restricted exports of memory-chip materials to South Korea, the latter said that this decision could ruin the global tech industry. This is because South Korean tech companies, such as Samsung and SK Hynix, which heavily rely on imports from Japan, contribute to more than 63% of the global memory chip market.
Moving around 30.68-30.79 this morning, USDTHB could be between 30.65-30.80 today.
US treasury yields rise on inflation data and Fed
Thai benchmark government bond yield (LB28DA, 9.4 years) on the previous trading day was 1.95%, -3.05 bps. Thai and US 10-year bond yields on the previous trading day closed at 2.00%, -2.35 bps, and 2.13%, +6 bps, respectively.
As US June CPI inflation was slightly better than expected and following Fed’s dovishness, US treasury yields rose.
On US yield curve inversion, US 10-year-3-month treasury spread was decreasingly negative, 10-year: 2.17% v 3-month: 2.13%, thus spread: -4 bps, compared to -13 bps on the earlier trading day, while 10-year-2-year treasury spread was still well positive, +28 bps.
Thai benchmark government bond yield (LB28DA, 9.4 years) could be between 1.94-1.96% today.
Sources: Bangkokbiznews, BBC, Bloomberg, CNBC, CNN, Financial Times, Investing.com, Reuters, South China Morning Post