Dollar drops but maintains modest weekly gains
Data on Tuesday showed that consumer prices rose in June, though the increase was seen as moderate. Wednesday's producer price inflation report, meanwhile, showed that prices were steady last month.
Powell has said he expects inflation to rise this summer as a result of Trump's tariff policies, which has pushed out expectations on when the U.S. central bank is likely to cut rates.
But the labor 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 labor 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.
Fed governor Chris Waller said on Friday that he favors a rate cut at the July meeting because he feels the tariffs are likely to have a limited impact on inflation. He added that underlying data "are not indicating a super healthy private sector labor market," and the Fed should "get ahead" of a possible hiring slowdown.
Waller's comments come amid near daily criticism by Trump of Powell over the Fed's reluctance to cut rates. The 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.
Fed funds futures traders are pricing in 45 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 last down 0.26 per cent on the day at 98.25, and is on track for a 0.39 per cent weekly gain.
The euro gained 0.49 per cent to $1.1652 but is headed for a weekly drop of 0.31 per cent.
Sterling rose 0.27 per cent to $1.3451 and is heading for a weekly decline of 0.32 per cent.
The Japanese yen, meanwhile, was slightly higher against the greenback heading into Sunday's upper house election in which Japan's ruling party looks vulnerable.
The dollar weakened 0.09 per cent to 148.46 yen, but is on track for a weekly gain of 0.71 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 United States.
U.S. 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.
In cryptocurrencies, bitcoin fell 0.78 per cent to $118,552, holding below a record $123,153 reached on Monday.
The U.S. House of Representatives on Thursday passed a bill to create a regulatory framework for U.S.-dollar-pegged cryptocurrency tokens known as stablecoins, sending the bill to Trump, who is expected to sign it into law.
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Straits Times
an hour ago
- Straits Times
Trump is winning his trade war, but Americans will pay the price
Sign up now: Get ST's newsletters delivered to your inbox All indications are that Americans will pay more for nearly all the goods they consume when the effects of all of US President Donald Trump's tariffs kick in. - Judging from the air of concession wafting across world capitals from Tokyo to Brussels, United States President Donald Trump is prevailing in his trade war. The White House is in a celebratory mood. Almost every day, press conferences and statements catalogue the many supposed benefits flowing from Mr Trump's strategy. The strategy has brought trade partners to the negotiating table, is catalysing trillions in foreign investment commitments, protecting America's strategic industries and generating billions in revenue. So much winning, in Trump-speak. If success, however, means more jobs, more trade and a stronger economy, the evidence is more suspect. All indications are that Americans will pay more for nearly all the goods they consume when the effects of all the tariffs kick in. The universal baseline tariffs of 10 per cent have already been in effect since April and will remain in place for around 100 nations with no trade deficits with the US, like Singapore and Australia. Effective from Aug 7, more than 70 nations will face 'reciprocal' tariffs , ranging from 10 to 50 per cent. The concept of reciprocity seems questionable as Mr Trump's strategy from the start has been to exert pressure on trade partners rather than strictly mirror their tariffs. Top stories Swipe. Select. Stay informed. Singapore LTA, Singapore bus operators reviewing Malaysia's request to start services from JB at 4am Singapore Despite bag checks and warnings, young partygoers continue to vape in clubs in Singapore Singapore President Tharman meets migrant workers who saved driver of car that fell into sinkhole Singapore Now flying solo, Acres CEO Kalaivanan Balakrishnan presses ahead with wildlife rescue efforts Opinion The charm – and drawbacks – of living in a time warp in Singapore Business UMS Integration becomes first SGX company with secondary listing in Malaysia Singapore Ong Beng Seng to plead guilty on Aug 4, more than 2 years after trip to Qatar with Iswaran Business Decoupling to save on tax? You may lose right to property if ties go awry For those nations running a trade surplus with the US, the rate is at least 15 per cent. It is higher still for others, where geopolitics and personal vendettas sharpen the blade. Brazil, for instance, has no trade surplus with the US. Nevertheless, it has been slapped with a rate of 50 per cent at least partly because Mr Trump has an issue with the government prosecuting former president and Trump ally Jair Bolsonaro on coup charges. India, at a 25 per cent rate , also faces an unspecified penalty for its import of Russian energy and arms. The US has also caught on to transshipping, the sly rerouting of goods through lower-tariff nations. This practice now invites a 40 per cent penalty. More deals are to come, if the President wants them, according to Trade Representative Jamieson Greer in an Aug 1 TV interview. It is not clear what kind of deal will be struck with America's near peer rival . China poses a peculiar problem and the US is still alternating between confrontation and pressing for an advantage. 'Their economy and ours are like a square peg and a round hole, they don't really fit together very well,' Mr Greer said. But what is crystal clear is that America has just executed a major turn, reshaping the post-World War II economy to reflect Mr Trump's priorities of preserving American dominance in all spheres, from military might and manufacturing to energy. And the man is just six months into the job. Costs are more tangible than benefits As Mr Trump is never tired of pointing out, the threat of tariffs has persuaded the European Union and Japan to commit to investing US$600 billion (S$774 billion) and US$550 billion in the US, respectively. Combined with earlier investment commitments, including from Saudi Arabia, Mr Trump has touted the figure of US$12 trillion. Tariff revenues now make up 5 per cent of federal revenues, much higher than the historical average of 2 per cent. The figures are impressive – US$150 billion was collected in mere months, with projections of 'several hundred billions' by the year end. And American companies can now sell their goods – beef, rice, cars and other items – with zero tariffs in many more nations. Key American industries are sheltered through sectoral tariffs enacted in auto, steel, aluminium and copper industries. Pharmaceuticals and semiconductors are next in line. But plenty of fine print applies. Analysts caution that many pledges from foreign partners may be delayed, only partially fulfilled, or merely symbolic. Foreign investments in the US usually flow in tandem with dollars earned by companies from exports to the US. If tariffs penalise these exports, investing more dollars is challenging. The actual inflow of foreign investment will likely surpass the levels seen in recent years, say analysts at the Peterson Institute of International Economics (PIIE) in Washington. Just not, they add, by the large margins claimed publicly by Mr Trump. Dr Marcus Noland, an international trade economist at PIIE, found a clear example of the impact of Mr Trump's tariffs right in his own kitchen. The granola he has for breakfast is made by an American company with a plant in Ontario, Canada. Due to higher tariffs, the price of this granola has risen more than 40 per cent. 'Shortages and higher prices, there's no good here,' he maintains. Experts have tallied the costs. The average US tariff rate in the first quarter was 2.4 per cent, but climbed to 10 per cent in June. The latest levy announcements are set to bring that to more than 18 per cent, according to analysts at Gavekal Research. The median US household stares down an extra US$1,270 in expenses for 2025, a number projected to reach US$1,619 next year. Economic growth slowed from near 3 per cent in 2024 to about 1.2 per cent over the first half of 2025 and may be zero for the rest of the year. Some models predict wages will fall and leave scars that will stay raw for a generation. A recession now appears 'very, very likely', to quote Moody's Analytics chief economist Mark Zandi, who has been warning of this outcome since Mr Trump made his 'Liberation Day' tariffs announcement in early April. Corporate bottom lines tell a similar story. Apple's June quarter results dazzled, but only because buyers rushed to beat tariffs. The 25 per cent levy on India – where the company now produces its smartphones for the US market – darkens the next quarter. Amazon says inventories are its buffer now. But the future is 'impossible to know', says its chief executive Andy Jassy as supply chains in China, where the e-commerce giant sources its vast array of products, are in the crosshairs. Manufacturers, wholesalers and retailers increasingly report paying higher prices for the goods and services they buy and are slowly beginning to raise the prices they charge their customers, says the US Chamber of Commerce. Higher tariffs will directly punish the domestic manufacturing industry given that approximately 56 per cent of US imports are composed of raw materials and intermediary and capital goods. These will especially hit the small businesses which operate on thin margins and will find it harder to absorb the tariffs. Defined as those with fewer than 500 employees, they account for over 40 per cent of the country's economic activity. Industry insiders are also sceptical of Mr Trump's push to expand access for American products. 'I don't know that we wanted zero tariffs on American goods,' said an analyst who advises American businesses operating in South-east Asia. 'The more important things are the non-tariff barriers.' Hoover Institution economist David Henderson narrowed in on the impact of tariffs on the most important actor in the US economy – the consumer. 'For some countries, notably those in the European Union, tariff rates will be lower than they were before Trump began. That is a victory. But we should be clear about whom it's a victory for,' he noted in a July 31 commentary. 'The main gainers are European consumers, and the secondary gainers are US exporters. The big losers, though, from the high US tariffs, are US consumers and producers who use the tariffed items as inputs, and the secondary losers are foreign exporters,' he said. He noted that while US consumers will pay a 19 per cent tariff rate on goods from the Philippines and Indonesia, and a 20 per cent on those from Vietnam, their consumers will pay a zero per cent tariff on imports from the US. 'Don't get me wrong. I'm glad that people in those three countries, almost all of whom are poorer than the average American, will get the benefits of one-way free trade,' he said. 'But I feel bad for Americans, who will pay higher taxes,' he said. The deals, although heralded as victories by the Trump Administration, have not been struck in the traditional way. No formal texts bind them; and there seem to be differences in how they are regarded in Washington and overseas. In his quest for a 'good' deal, nation by nation, Mr Trump may have squeezed out some advantages. But will a refusal to consider the reality of an interdependent world come back to bite America in ways not yet apparent? And no monetary or symbolic victory can be counted as a 'good deal' if it results in squandering a precious asset that took the US years to earn – global goodwill. Can America afford to arm-twist the very same countries whose help it needs in its geopolitical rivalry with China? And if tariffs continue to be applied in purely mercantilistic terms, they may have the effect of transforming America First into America Alone.
Business Times
2 hours ago
- Business Times
Opec+ agrees in principle another large oil output hike: sources
OPEC+ agreed in principle to boost oil output by 548,000 barrels per day (bpd) in September, two Opec+ sources said on Sunday (Aug 3), as the group finishes unwinding its biggest tranche of production cuts amid fears of further supply disruptions from Russia. A decision is expected at a meeting scheduled to begin at 11 am GMT, amid fresh US demands for India to stop buying Russian oil as Washington seeks ways to push Moscow for a peace deal with Ukraine. Fresh European Union sanctions have also pushed Indian state refiners to suspend Russian oil purchases. Opec+, which consists of the Organization of the Petroleum Exporting Countries (Opec) and its allies, pumps about half of the world's oil. It has been curtailing production for several years to support the market. But it reversed course this year to regain market share, and as US President Donald Trump demanded Opec pump more oil. Opec+ began output increases in April with a modest hike of 138,000 bpd, followed by larger hikes of 411,000 bpd in May, June and July and 548,000 bpd in August. If the group agrees to the 548,000 bpd September increase, it will have fully unwound its previous production cut of 2.2 million bpd, while allowing the United Arab Emirates to raise output by 300,000 bpd. Opec+ still has in place a separate, voluntary cut of about 1.65 million bpd from eight members and a two million bpd cut across all members, which expire at the end of 2026. Sources have said previously the group had no plans to discuss other tranches of cuts on Sunday. REUTERS
Straits Times
6 hours ago
- Straits Times
Big Tech earnings strength is bright light in murky stock market
The Nasdaq 100 index remains up more than 30 per cent off its low from early April. NEW YORK – Wall Street had a lot riding on whether this week's big-tech earnings would meet increasingly high expectations. By and large, the companies delivered. The stock market finished the week on a down note with the selloff on Aug 1, which was in part sparked by mixed results from after the market closed on July 31, as well as a weak jobs report and fears about the economic impact of President Donald Trump's sweeping global tariffs. But for the most part, investors looking for strength from technology companies to justify their market leadership found plenty of it in their reports. 'The sector is proving itself to have something like Teflon status, as fundamentals look strong, revenue growth has come in quite significantly higher than expected, and margins remain relatively healthy,' said Kevin Gordon, senior investment strategist at Charles Schwab & Co. 'While things aren't perfect, and valuations are nearing a level that has acted as a ceiling in the past, we still have a high degree of optimism, especially as we go up the market-cap spectrum.' Alphabet started the season off by reporting strong sales, lifted by artificial intelligence. Last week, Apple posted its strongest revenue growth in more than three years, while Meta Platforms spiked to a record as it beat expectations and outlined aggressive spending on AI. Microsoft Corp. reported robust strength in its cloud business on the back of AI demand, enough to temporarily lift it to a US$4 trillion market capitalisation, only the second company ever to do so. The stock has risen for 10 straight weeks, its longest streak since 2023. Amazon was the exception, offering a tepid forecast due to relatively slow growth in its cloud-computing division and heavy investments into AI. From here, investors will turn to chip behemoth Nvidia, which reports at the end of the month. The Nasdaq 100 Index finished the week down 2.2 per cent, with much of the drop coming on Aug 1. However, the Nasdaq 100 remains up more than 30 per cent off its low from early April, while the Mag Seven Index is up more than 40 per cent. Those gains are raising questions among some Wall Street pros about whether the rally in tech has become overly stretched. The Nasdaq 100 is trading at nearly 27 times estimated earnings, well above its 10-year average of 22. Overall, however, none of the companies that have reported are showing dramatically weakening fundamentals, which is particularly important as uncertainty continues to swirl around the impact of trade policy and tariffs. More than 96 per cent of tech firms in the S&P 500 Index have topped expectations for profits, while roughly 93 per cent have for revenue, according to data compiled by Bloomberg. For the index overall, the beat rates stand at 82 per cent for earnings and 68 per cent for revenue. While Wall Street has long been broadly positive on big tech, last week's results reinforced it's continuing potential. The Magnificent Seven are expected to see earnings growth of 24.2 per cent this year, a dramatic increase from the 21.4 per cent pace that was predicted just a month ago, according to Bloomberg Intelligence data. Revenues are anticipated to rise 13.4 per cent, up from the 11.5 per cent pace seen in early July. Of course, that level of growth would represent a deceleration from last year, when the Mag Seven's net income rose 36 per cent and revenue gained 14 per cent. But the group continues to outgrow the broader market, which is expected to see earnings expand by 8.9 per cent in 2025 on revenue growth of 5.5 per cent. 'This slowing is understandable given how quickly these names were growing, and for how long,' said Mr Michael Nell, a senior investment analyst and portfolio manager at UBS Asset Management. 'We're not seeing the kind of dramatic deceleration that would be a cause for concern, just a reflection that these large companies can't grow to the sky forever.' Now investors are waiting on Nvidia, the chipmaker at the heart of the AI boom and the world's biggest company, which is scheduled to release its earnings on Aug 27. Advanced Micro Devices, its much-smaller rival in AI processors, reports on Aug 5. The bottom line for both is that big tech reaffirmed their intention to continue spending on AI, as Meta, Microsoft, Alphabet and Amazon all increased their plans for capital expenditures. That represents a cluster of encouraging data points for Nvidia, which derives more than 40 per cent of its revenue from those four companies, according to supply chain data compiled by Bloomberg. 'Use cases for AI are emerging and some companies are already seeing a payoff, meaning this isn't speculative anymore,' Mr Nell said. 'That doesn't mean big tech can't get ahead of themselves and pull back, but tech is on an inexorable march to be a larger and larger part of the market. That's been the trend my whole career, and I don't know why it would stop now.' BLOOMBERG
