Dollar steadies amid pandemic concerns, inflation in focus - Reuters News

By Julien Ponthus

LONDON, July 12 (Reuters) - The safe haven dollar ticked up against most currencies on Monday as concerns about the pandemic made investors cautious, while they also awaited more clues about the global economic recovery before making their next moves.

With markets hyper-sensitive to any talk of early tapering, U.S. inflation data on Tuesday will be closely watched ahead of testimony by Federal Reserve Chair Jerome Powell on Wednesday and Thursday.

Meanwhile, the People's Bank of China's surprise policy easing on Friday, meant to boost the post-COVID economic recovery, failed to provide lasting momentum. (Full Story)

"While welcome, the move also signals that the authorities are concerned about China’s growth prospects, so it's mixed news," said Marshall Gittler, head of investment research at BDSwiss Holding.

The yuan was just slightly lower at 6.4750 per dollar CNY=CFXS after Chinese shares and bonds rose. CNY/.SS

Economists polled by Reuters expect U.S. consumer prices for June to have risen 0.4% from May, and 4.0% from a year earlier, after two straight months of sharp gains.

Any signs that inflation could be more persistent than previously thought could fan expectations the Fed may exit from current pandemic-era stimulus earlier, supporting the dollar against other major currencies.

Conversely, more benign data could lead investors to think the U.S. central bank can afford to maintain an easy policy framework for longer, encouraging more bets on risk assets, including risk-sensitive currencies.

At 1108 GMT, the dollar =USD was up 0.22% against a basket of currencies while the euro EUR=EBS lost 0.26% at $1.1848 against the greenback.

Sterling fell 0.36% to $1.3860 while British Prime Minister Boris Johnson is expected to confirm plans to remove nearly all remaining COVID-19 restrictions in England from July 19, despite a surge of cases to levels unseen for months.

"In the UK there is optimism about the strength of the rebound, that with the further lifting of restrictions we will see additional demand emerging," said Colin Asher, senior economist at Mizuho in London.

"There are expectations the Bank of England may be one of the major banks to hike interest rates next year."

Although few investors expect the global economic recovery to be derailed by fresh waves of COVID-19 infections, vulnerable currencies such as the tourism-exposed Thai baht have taken a hit.

The baht THB=TH was trading above Friday's low but has lost about 5% against the dollar in a month, and on Monday Thailand's central bank warned the economy may miss its projections as virus curbs hit growth. EMRG/FRX

Elsewhere in emerging markets, the rand ZAR= sank more than 2% to a low of 14.4968 to the dollar as violence broke out after the jailing of former South African President Jacob Zuma, resulting in property damage and road closures. (Full Story)

Japan's safe-haven yen stood at 110.18 yen per dollar JPY=, off Thursday's one-month high of 109.535.

Cryptocurrencies were on the defensives with bitcoin down about 1.5% at $33,760 BTC=BTSP and ether ETH=BTSP down 1.2% at $2,113.

Yields hold above five-month lows before auctions - Reuters News

By Karen Brettell

NEW YORK, July 12 (Reuters) - U.S. Treasury yields eased on Monday but held above five-month lows reached last week ahead of a Treasury sale of $120 billion in new coupon-bearing supply.

Treasury yields fell quickly last week as investors worried that job growth will be slow and that the spread of new variants of the coronavirus could result in new business shutdowns.

Analysts say that much of the move was likely technical, however, with investors covering short trades and pouring cash into Treasury exchange-traded funds (ETFs).

Many investors were caught “offsides” said Tom di Galoma, a managing director at Seaport Global Holdings in New York. Now, “you’ve got some profit taking that’s taking place with supply coming,” he said.

The Treasury will sell $58 billion in three-year notes and $38 billion in 10-year notes on Monday, followed by $24 billion in 30-year bonds on Tuesday.

Demand for the longer-dated notes will be watched to see if buyers step in at the lower yields. (Full Story)

Benchmark 10-year note yields US10YT=RR were last at 1.344%, after falling to 1.250% on Thursday, the lowest since Feb. 16. Thirty-year bond yields US30YT=RR were at 1.967%, after touching 1.856% on Thursday, the lowest since Feb. 2. 

Ten-year yields have dropped from 1.544% on June 25 and 30-year yields are down from 2.177% over the same time frame.

Investors will also be watching consumer price inflation data on Tuesday for any indications that price pressures may be becoming embedded in the economy. The Federal Reserve has said that recent inflation increases are likely to be temporary.

Economists polled by Reuters expect the data to show that core inflation increased by 0.4% in June, with a year-on-year increase of 4%.

Oil prices fall as economic worries offset tightening supplies - Reuters News

• G20 says coronavirus variants threaten growth
• OPEC+ impasse continues, stoking price war fears
• U.S. adds oil, gas rigs for another week, data shows

By Noah Browning

LONDON, July 12 (Reuters) - Oil prices slipped on Monday as concerns about slowing global growth outweighed the prospect of tightening supply after talks among key producers to raise output in coming months stalled.

Brent crude LCOc1 for September fell 86 cents, or 1.1%, to $74.69 a barrel by 1240 GMT. U.S. West Texas Intermediate crude CLc1 for August was at $73.71 a barrel, down 85 cents, or 1.1%.

Both benchmarks fell about 1% last week but remain close to highs last reached in October 2018. Brent climbed above $77 last week.

The spread of coronavirus variants and unequal access to vaccines threaten the global economic recovery, finance chiefs of the G20 large economies said on Saturday. (Full Story)

"Traders are now refocusing on the spread of the COVID-19 pandemic and global concerns over the new variants’ expansion are weighing on prices, despite tightening oil supplies globally," Rystad Energy analyst Louise Dickson said.

The Organization of the Petroleum Exporting Countries and their allies, a group known as OPEC+, abandoned talks last week over an output deal, which included pumping more oil from August, after a dispute between Saudi Arabia and the United Arab Emirates about how to extend the pact. (Full Story)

Although failure to agree means less oil in the short term, analysts say the collapse of talks raises the longer term prospect of producers abandoning the deal and pumping at will.

"The market has been a bit negative as of late amid the growing sense that the latest OPEC+ impasse could be a precursor to a pump-and-grab scenario, meaning a lot more oil potentially gets put on the market," said Stephen Brennock of oil broker PVM.

Saudi Arabia and Oman called on Monday for continued cooperation between OPEC and allied producers. (Full Story)

Front-month WTI crude futures posted a sixth weekly gain last week after a report from the U.S. Energy Information Administration showed U.S. crude and gasoline stocks fell while gasoline demand reached its highest since 2019. (Full Story)

In response to higher oil prices, U.S. energy firms added oil and natural gas rigs for a second week in a row, data from Baker Hughes showed.

German June wholesale prices +1.5% m/m, +10.7% y/y - Reuters News

July 12 (Reuters) - Germany's Federal Statistics Office reported the following economic indicator on Monday (changes are in percent)DEWPI=ECI: