US dollar slips against euro but maintains weekly gains
Data last Tuesday showed that consumer prices rose in June, though the increase was seen as moderate. Wednesday's producer price inflation report showed that prices were steady last month.
Powell has said that he expects inflation to rise this summer as a result of Trump's tariff policies. His comments have pushed out expectations of when the US central bank is likely to cut interest rates.
But the labour market is showing signs of weakness even as headline job gains and the unemployment rate remain relatively solid.
'We're waiting on the tariffs to become real and not just a negotiating ploy and waiting on the labour market to reveal itself,' said Lou Brien, strategist at DRW Trading in Chicago.
'Layoffs are at a lower level than they were pre-pandemic, but the hiring is terrible. And if, all of a sudden, the layoffs come up, we're going to get a significant increase in the unemployment rate very quickly,' Brien said.
BT in your inbox
Start and end each day with the latest news stories and analyses delivered straight to your inbox.
Sign Up
Sign Up
Fed governor Chris Waller said on Friday that he favours a rate cut at the July meeting because he feels tariffs are likely to have a limited impact on inflation. Waller added that underlying data 'are not indicating a super healthy private sector labour market', and the Fed should 'get ahead' of a possible hiring slowdown.
Powell is facing almost daily criticism from Trump over the Fed's reluctance to cut rates. The US dollar tumbled on Wednesday on reports that Trump was planning to fire the Fed chair, but rebounded after Trump denied the reports. Powell's term will end in May.
Chicago Fed President Austan Goolsbee said he is a 'little wary' about signs in the June consumer price index that tariffs are pushing up goods inflation, but still believes the US economy is in a good place and the Fed's policy rate can come down a 'fair bit' over the next 12 months.
Fed funds futures traders are pricing in 46 basis points of cuts by year-end, implying that two 25 basis point cuts are seen as most likely, with the first coming in September.
The dollar index was roughly flat on the day at 98.49, and is on track for a 0.65 per cent weekly gain.
The euro was last up 0.22 per cent at US$1.1621 but is headed for a weekly drop of 0.59 per cent.
The euro pared gains after the Financial Times reported that Trump is pushing for a minimum tariff of 15-20 per cent in any deal with the European Union.
Sterling was flat at US$1.3411 and is heading for a weekly decline of 0.64 per cent.
The Japanese yen was slightly lower against the greenback heading into Sunday's upper house election, in which Japan's ruling party looks vulnerable.
The US dollar gained 0.1 per cent to 148.75 yen and is on track for a weekly gain of 0.93 per cent.
Polls suggest Japan's ruling coalition is at risk of losing its majority, which would stir policy uncertainty at home and complicate tariff negotiations with the US.
US Treasury Secretary Scott Bessent told Japanese Prime Minister Shigeru Ishiba that their countries can reach a 'good agreement' on tariffs, Ishiba said on Friday after meeting Bessent in Tokyo. REUTERS
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Business Times
6 minutes ago
- Business Times
Asia: Stocks mixed with trade and earnings in focus; Tokyo reopens with gains
[HONG KONG] Asian markets were mixed on Thursday as traders kept an eye on earnings from Wall Street titans this week while tracking US trade talks just over a week before the deadline for a deal. Japanese stocks edged up and the yen held gains after Prime Minister Shigeru Ishiba said he will stay in power despite the weekend election debacle. Investors took a more cautious path after a largely positive day on Wall Street, where the S&P ended above 6,300 points for the first time and the Nasdaq chalked up yet another record. Equities continue to rally on expectations key trading partners will strike agreements with Washington before Aug 1 to avoid Donald Trump's sky-high tariffs, with the US president saying several deals were close. Just three have been struck so far. His press secretary Karoline Leavitt said more could be reached before next Friday but also warned the president could unveil fresh unilateral tolls in that time. While Trump's initial tariff bombshell on April 2 rattled global markets before he delayed introducing the measures twice, they have seen more muted reactions to successive threats as traders expect him to eventually row back again. BT in your inbox Start and end each day with the latest news stories and analyses delivered straight to your inbox. Sign Up Sign Up That optimism has been helped by data indicating the US economy remained healthy despite the imposition of other levies that are beginning to be felt on Main Street. And SPI Asset Management's Stephen Innes warned traders could be in for a shock next week. 'The new tariff regime isn't being priced - full stop,' he wrote. 'Markets have seen this movie before: tough talk, last-minute extensions, and deal-making in overtime. But this time, Trump isn't bluffing. He's already posted 'No extensions will be granted'. 'The new rates - 30 per cent on the EU, 35 per cent on Canada, 50 per cent on Brazil - are politically loaded and economically radioactive. If they go live, there's no soft landing.' Hong Kong has been the standout in Asia this year, piling on around a quarter thanks to a rally in Chinese tech firms and a fresh flow of cash from mainland investors. And the Hang Seng Index continued its advance on Tuesday, with Shanghai, Sydney and Taipei also up. There were losses in Singapore, Seoul, Wellington and Manila. Tokyo rose as investors returned from a long weekend to news that Ishiba would remain in power even after his ruling coalition lost its majority in Japan's lower house elections Sunday, months after it suffered a similar fate in the upper house. His refusal to leave helped the yen push higher against the dollar and other peers, though observers warned the government's tenure remained fragile and investors remained nervous. The yen strengthened to 147.08 Tuesday before paring some of the gains. That compares with 148.80 Friday. But Franklin Templeton Institute's Christy Tan said that 'Ishiba now faces heightened political headwinds, including pressure over inflation, taxes, and US trade talks'. Focus also turns this week to earnings from some of the world's biggest names, including Tesla, Google-parent Alphabet, General Motors, Intel and Coca-Cola. While there will be plenty of attention given to the results, the firms' guidance will be key as investors try to gauge companies' pulses in light of Trump's trade war. AFP
Straits Times
2 hours ago
- Straits Times
Marcos heads to White House with some Washington momentum
US Defense Secretary Pete Hegseth meets with Philippine President Ferdinand Marcos Jr. at the Pentagon, in Washington, on July 21. WASHINGTON - Philippine President Ferdinand Marcos Jr. heralded deeper ties with the US after meeting top officials in Washington. The test of whether that's true will come on July 22 when President Donald Trump welcomes him to the White House. That Oval Office encounter will take place after visits by several foreign leaders eager to make deals before the US-imposed Aug 1 tariff deadline. On July 21, Mr Marcos went to both the Pentagon and State Department as his government tries to slash pending 20 per cent tariffs and bolster the bilateral security and investment relationship between the two allies. 'Our storied alliance has never been stronger or more essential than it is today and together we remain committed to the Mutual Defense Treaty,' Defense Secretary Pete Hegseth said in remarks alongside Mr Marcos. He called the Asia-Pacific 'our priority theater' and said the US was 'proud to support our mutual economic vitality, including your efforts to modernise your armed forces and collective defense'. Mr Hegseth also lauded 'remarkable strides' in the relationship since his March visit to the region, pointing to expanded joint military exercises in and around the South China Sea as well as deploying cutting-edge missiles and unmanned systems, and revitalising defense industrial bases on both sides. Mr Marcos spoke of how 'you cannot limit Philippine-American relationship to one dimension' and said Mr Hegseth's March visit 'sent a very clear message about our continuing partnership and our continuing understanding of the mutual defense treaty'. 'Friends, partners' Later on July 21, Mr Marcos and Secretary of State Marco Rubio celebrated a relationship as 'friends, partners, and allies' committed to regular high-level engagement, according to State spokesperson Tammy Bruce. The two officials discussed a range of security issues and also addressed investment, including building on the Luzon Economic Corridor – an initiative started under President Joe Biden. Above all the minister-level diplomacy, however, looms the always-present possibility that Mr Trump could torpedo the script when the two presidents sit in the Oval Office. Mr Marcos has described the higher 20 per cent tariff rate as 'very severe', and said he would push for a trade deal with the US to lower the duty. He is the latest global leader to face a Trump administration ready to economically punish security allies, injecting stress into long and venerable relationships. Japan and South Korea, for instance, have strong ties to the US, but that didn't stop Mr Trump from threatening higher duties. 'With security deeply intertwined with economics, punitive measures from the United States will not inspire confidence in US allies and will perpetuate doubt at the United States' willingness to help Asian economies buffer against Chinese economic coercion,' said Mr Japhet Quitzon, associate fellow at the Washington-based Center for Strategic and International Studies. There's pressure on Mr Marcos to secure a deal as Mr Trump has announced agreements with Southeast Asian neighbors Vietnam and Indonesia. While the Philippines is less trade-dependent than its regional peers, having a higher tariff rate would make it less attractive to investors. Mr Marcos also needs an economic accomplishment after a midterm election setback that showed the strength of his ally-turned-rival, Vice-President Sara Duterte, that risks undermining his authority in the latter half of his six-year term. His government is aiming to grow the economy by at least 5.5 per cent this year – lower than earlier forecasts as Mr Trump's tariffs loom. The office of the US Trade Representative and the Commerce Department didn't respond to requests for comment on July 21. Earlier, White House Press Secretary Karoline Leavitt said of the US-Philippines trade agenda, 'Perhaps this will be a topic of discussion – you will all see for yourselves in the Oval Office, as you always do. But the Aug 1 deadline is just the – really, the start date for when the United States of America will begin collecting this revenue from all of the countries around the world who the president has sent these letters to.' The Philippine leader has already restored security relations with the US that were strained under his predecessor, Mr Rodrigo Duterte, Sara's father. In just three years of his presidency, Mr Marcos expanded US access to military bases, hosted thousands of American soldiers for drills, and allowed the deployment of a US missile system. Fostering the alliance with Manila will be equally crucial for Mr Trump, as his administration seeks to counter China's growing assertiveness in the Asia-Pacific. The Philippines sits at a strategically important location near two regional flashpoints: Taiwan and the South China Sea. Confronting China US officials have repeatedly assured an 'ironclad' commitment to the Philippines – its oldest military ally in Asia – as Manila increasingly confronts Beijing in disputed waters. To show that the security alliance could extend to economic relations, the US earlier pledged to support Philippine infrastructure projects, and bring in US$1 billion (S$1.66 billion) worth of investments. 'Making concessions on defense is one good way of securing a trade deal, given that pushing allies to do more is one of Trump's priorities,' Mr Darren Tay, head of Asia country risk at Fitch Solutions research unit BMI, said on a webinar last week. Philippine ambassador to the US Jose Manuel Romualdez has been optimistic about the White House meeting, as well as the prospect of the two countries reaching a free trade agreement down the line, citing Mr Trump's gesture to invite Mr Marcos to stay at Blair House in Washington. The two leaders also share a personal connection, with Mr Marcos's mother, former Philippine First Lady Imelda Marcos, an acquaintance of Mr Trump. 'That means something, that you are obviously given importance by your host,' the ambassador said. BLOOMBERG
Straits Times
2 hours ago
- Straits Times
‘Involution': China's problem with competition is there's too much of it
China's efforts to tackle domestic overcompetition face new urgency in the face of Trump's tariffs. TIANJIN, China – It's the circle of life in China's business world. A promising technology or product emerges. Chinese manufacturers, by the dozens or sometimes the hundreds, storm into that nascent sector. They ramp up production and drive down costs. As the overall market grows, the competition becomes increasingly cutthroat, with rival companies undercutting one another and enduring razor-thin profit margins or even losses in the hope of outlasting the field. Adding to the competitive fervour, China's local governments, each with its own target for economic and job growth, back a homegrown champion and shower it with financial and bureaucratic support. Soon, the whole industry, awash in production capacity, is trapped in a race for survival. While most governments encourage vigorous competition and low prices, China is going in the opposite direction. It is trying to rein in 'involution' - or 'neijuan' as it is widely used in the country to describe a self-defeating cycle of excessive competition and damaging deflation. Chinese President Xi Jinping pledged to take steps to crack down on 'low price and disorderly competition' and eliminate outdated industrial capacity at a high-level economic policy meeting in July. At another recent gathering, on urban development, Mr Xi questioned whether every province needed to rush into sectors such as artificial intelligence and electric cars. 'Price wars and 'involutionary' competition will only encourage 'bad money driving out good money,'' wrote People's Daily, the official mouthpiece of the Chinese Communist Party. 'Simply 'rolling' prices downward will not result in a winner.' China's efforts to tackle involution face new urgency as President Donald Trump's tariffs discourage exports to the United States. Other countries are also wary of a flood of inexpensive Chinese goods redirected their way. These unsold goods, combined with a slowing domestic economy, have intensified competition, fueling a deflationary spiral. Top stories Swipe. Select. Stay informed. World Trump 'caught off guard' by Israel's strikes in Syria Opinion Singapore's vaping crisis lays bare the drug addiction nightmare for parents Singapore LTA seeks tailored solutions to improve Bukit Panjang LRT's maintenance inspections Multimedia 'It's very sad': She comforts loved ones turned away by inmates Opinion Sumiko at 61: 7 facts about facial skin ageing, and skincare ingredients that actually work Singapore Subsidies and grants for some 20,000 people miscalculated due to processing issue: MOH Opinion With Shatec cutting back operations, what's next for the hospitality sector? World US not rushing trade deals ahead of August deadline, will talk with China, Bessent says China's gross domestic product deflator, a broad measure of prices across the economy, has fallen for eight straight quarters – the most prolonged downturn on record. In June, the country's producer price index, a measure of the price of goods leaving factories, fell by its largest amount in nearly two years. China has pledged to step up its regulation of companies driving down prices and to rein in subsidies and incentives from local governments that provide a lifeline to 'zombie' firms, or noncompetitive firms kept alive by outside support. Fierce competition and overcapacity have plagued industries such as steel and cement. And newer, fast-growing sectors such as solar panels and electric vehicles have quickly become a race to the bottom. It has created an unusual dynamic: Chinese firms collectively dominate market share in an industry, but individual companies struggle to eke out a consistent profit. During a meeting on July 16 of China's State Council, or Cabinet, officials pledged to regulate 'irrational competition' in the EV sector through investigations into costs and price monitoring. The measures came after BYD, China's largest EV manufacturer, slashed prices on nearly two dozen models of electric and hybrid cars in May. The China Association of Automobile Manufacturers, a government-linked industry group, rebuked BYD and warned about the perils of 'price wars.' Zhang Kai, a salesperson for Xpeng Motors, one of China's biggest EV makers, said pricing pressure would remain because of sluggish consumer spending and overcapacity in the sector. He said manufacturers had no choice but to maintain discounted prices for EVs, even after a popular government subsidy support program aimed at helping people buy energy-efficient cars and other goods comes to an end. 'This is a new normal,' he said. 'Once prices drop, they definitely won't go back up.' To understand the challenges of excessive competition, consider Hebei province in northern China. Hebei, a region renowned for its mining, heavy industry and agriculture, has become notorious for cutthroat competition. One publication referred to the area's merchants as 'price butchers.' At an industrial park in Hebei, more than 100 garment makers operate in rows of nearly identical storefronts, selling clothing that is so similar that it is hard to distinguish one from another. The complex caters to customers interested in finding factories to mass-produce T-shirts, sweatshirts and other pieces of outerwear. The commercial zone was established about a decade ago by the Suning County government, after garment manufacturers started building factories on farmland in Hebei to meet the growing demand for inexpensive clothing from online shoppers. The local province is opening an even-larger industrial park for 'knitting technology' adjacent to the existing one. Construction had been scheduled to finish in May, but the complex appeared only partly built in June. And the existing industrial park feels almost abandoned. Many storefronts were closed, and the lone restaurant was shuttered. Zhang Cuihua is one of the small T-shirt manufacturers working in the complex. She said she produced about one million shirts a year for wholesalers across China. Since 2024, the competition has grown so intense that her business has been losing money. 'The involution is unbearable – people are driving themselves to death,' said Ms Zhang. 'The general market environment is poor, sales are stagnant and production capacity is overloaded.' She said that customers were constantly asking her for price cuts, but that she had already reduced her margin per shirt more than 60 per cent in the past several years. Ms Zhang said some of her competitors were willing to sell items at a loss to turn inventory into cash. Then customers ask her to match the competition's low prices, leaving her in a no-win situation: Match the price and lose even more money, or don't match and lose the business entirely. She said many factories had closed, but that had not alleviated the competitive pressures. Tang Yongsheng, a T-shirt manufacturer in Guangdong, operates eight factories in Hebei. He said his competitors were willing to undercut one another endlessly, especially as many of China's dominant e-commerce platforms drive down prices. Mr Tang said many factories in Hebei engaged in the race to the bottom because the local government encouraged continued investment. It is easier to borrow money from banks there than in other parts of the country. That drives factory owners to do whatever it takes to stay in business. 'The main goal is to survive,' Mr Tang said. 'They'll stubbornly persist.' NYTIMES
