Dollar steady as traders await U.S. payroll data
Sterling inched up after a nearly 1% drop on Wednesday, when UK Prime Minister Keir Starmer's office backed finance minister Rachel Reeves after rumors she would be dismissed over investor worries about Britain's finances.
British government bonds stabilized after a selloff on Wednesday fueled by a tearful appearance by Reeves in parliament a day after the government backed down on welfare reforms.
The pound edged higher by 0.2% and last fetched $1.3665, while the euro was muted at $1.180, still near the September 2021 top it hit earlier this week. The yen was a tad weaker at 143.80 per dollar.
Currency strategist Carol Kong at Commonwealth Bank of Australia said market participants are worried Reeves could be replaced with someone less committed to the government's self-imposed fiscal rules and more willing to borrow.
"The pound can remain under downward pressure unless the U.K. government takes measures to restore market confidence in U.K. finances."
The U.S. dollar index, which measures the greenback against six other currencies, was flat at 96.748, remaining close to the 3-1/2-year lows it has been rooted to this week. The index is on course for a 0.5% drop for the week.
All eyes are on the U.S. Labor Department's comprehensive employment report for June, due for release on Thursday ahead of the July 4 holiday, which is expected to show that unemployment edged up to a more than a 3-1/2-year high of 4.3%, according to economists polled by Reuters.
Wednesday's private survey painted a grim picture of the labor market, pushing traders to shift expectations of when the Federal Reserve will lower interest rates. Traders are pricing in a 25% chance of a cut in July versus 19% a day earlier, data compiled by LSEG showed.
Today's data "will bring growth concerns firmly back into the spotlight and pressure on the Fed to accelerate its timetable is only going to increase," said Max McKechnie, global market strategist at J.P. Morgan Asset Management.
"With the inflation side of its mandate still further away from target than the employment side, the Fed should stick to its guns. The bar for easing should remain higher than a single weaker labour market print."
Ahead of the July 9 tariff deadline, U.S. President Donald Trump said the United States had struck a deal with Vietnam and that he could push other countries to reach similar agreements.
Although details were scant, Trump said Vietnamese goods would face a 20% tariff and trans-shipments from third countries through Vietnam will face a 40% levy.
The Vietnamese dong slid to a record low, with UBS analysts suggesting the passing of tariff costs to exporters will likely be mitigated by the central bank through the allowance of a steady depreciation of the dong.
Progress on other deals has been slow. Japan has invoked national interests as talks with the U.S. struggled, while South Korea's President Lee Jae Myung on Thursday said negotiations were looking difficult and that he could not say whether talks would conclude by next Tuesday.
Meanwhile, Republicans in the U.S. House of Representatives cleared a procedural hurdle to advance Trump's massive tax-cut and spending bill, paving the way for a debate and final vote on the highly contested legislation.
The bill is set to add $3.3 trillion to an already swelling national debt, stoking fiscal worries. Bond investors around the world are growing increasingly nervous about government deficits in countries including Japan and the United States.
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The remaining 19% of the company was owned by this offshore company called S3T which, we know and learned was owned partly by Imperial Brands and partly by Mr. Sithat Xaysoulivong who, as it happened, was an in-law of the Lao prime minister at the time, Bounnhang Vorachit. So there was clearly some familial relationship involved. And ultimately this deal paid $28 million over basically two decades to the former prime minister's in-law. And this had big consequences for the Lao government. One tobacco control group did a study of the consequences of this deal on public health, and what they found was that the Lao government missed out on $143 million in tobacco tax revenue and that is because one provision of this tobacco contract capped cigarette excise taxes and essentially left Laos with some of the cheapest cigarettes in the world. RFA: How much is a packet of cigarettes in Laos? McLure: The cheapest brands of cigarettes in Laos cost about 7,000 kip. That's about 32 U.S. cents. 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And the way that governments can do this is by increasing tobacco excise taxes. Now, this 25-year contract in Laos absolutely prevented the Lao government from doing that. RFA: And as we know, Laos is one of the poorest countries in Asia, and it doesn't have a very well-developed health system. So you can see what the sort of impacts would be. McLure: That's right. One of my colleagues visited one of the government hospitals in Laos, and she interviewed people who were there with smoking-related diseases. And the treatment was extremely expensive. And even for many people who have common smoking-related diseases like emphysema or lung cancer … particularly people in the countryside, people in villages, any form of radiation or chemotherapy or treatments like that are going to be out of reach. RFA: So what does Imperial Brands say about this? McLure: During our reporting, we reached out to Imperial Brands to ask them about this contract and specifically to ask why they decided to include an in-law of the prime minister at the time as part of this contract. And what they told us was that, for one thing, they said they comply with all regulations and generally behave in an ethical manner. But they didn't respond to the substance of our questions. We asked them as well about why this contract was kept secret for so long. The contract, in fact, itself, contained a secrecy provision. They told us that this type of confidentiality is normal in such commercial arrangements. RFA: And did the Lao government respond at all to any of your inquiries or Mr. Sithat Xaysoulivong or Mr. Bounnhang Vorachit? McLure: Unfortunately, the Lao government, Mr. Vorachit, Mr. Sithat, even the current Lao Prime Minister Sonexay Siphandone, they did not respond to our inquiries for this story. RFA: I understand that this isn't a problem that's totally isolated to Laos, that major tobacco companies have reached deals with authoritarian countries and other nations. McLure: That's right. You know, what's really a little bit unusual about this deal is that we were able to get the documents that showed exactly how the payments flowed from the Lao tobacco company and Imperial to the in-law of Laos' then prime minister. But we've seen that British American Tobacco, another one of the tobacco giants, has been involved in dealings with the North Korean regime in violation of U.S. sanctions. In fact, they agreed to pay more than $620 million as part of a deferred prosecution agreement with the U.S. Justice Department as a result of that. RFA: So what's the future of this agreement in Laos? I understand that it's coming up to its term now. McLure: Well, that is an interesting question because this is a 25-year agreement that was signed in 2001. It will expire next year. Now, the government of Prime Minister Sonexay Siphandone has already informed Imperial that they won't be renewing this agreement again. However, they did leave the door open to negotiating a new agreement with the same tobacco company. We'll see if that comes to pass and whether or not any insiders like Mr. Sithat, the in-law of former Prime Minister Vorachit, are involved. One thing that we do know is that Mr. Sithat is also close to the family of the current Prime Minister Sonexay. So it remains to be seen. Ultimately, what we've been told is that the current prime minister will be the one making the decision. And as we've seen, this could have huge impacts on the future of smoking in Laos and on Laos' public health. The Examination is a nonprofit newsroom that investigates global health threats. Their investigative report was supported in part by a grant from the Pulitzer Center.
