2025-08-06 05:18

SINGAPORE, Aug 6 (Reuters) - The dollar remained fixed in its recent trading channel on Wednesday, with investors choosing to stay on the sidelines after another round of weak data and as U.S. President Donald Trump prepared to fill a coming vacancy on the Federal Reserve's Board of Governors. Trump said on Tuesday he will decide on a nominee by the end of the week and had separately narrowed the possible replacements for Fed Chair Jerome Powell to a short list of four. Sign up here. Data out the same day also showed the U.S. services sector activity unexpectedly flatlined in July even as input costs climbed by the most in nearly three years, underscoring the hit from Trump's tariffs on the economy, which has also begun to bite corporate earnings. Still, those did little to sway the dollar, as traders were hesitant to take on fresh positions ahead of news on who would fill the Fed board vacancy. Concerns are mounting that partisan loyalty would invade the staid world of central bank policy. The dollar was last 0.1% weaker against the yen at 147.37, while the euro ticked up 0.1% to $1.1586. Sterling last bought $1.331, up 0.07% so far on the day. "I still think that between now and the end of the week, if Trump is going to make an announcement about who he wants to fill the vacant board seat, depending on... how credible (the markets) view that candidate to be, I think that has the potential to prompt some reaction across everything," said Ray Attrill, head of FX research at National Australia Bank (NAB). "For me, that's...potentially the biggest swing factor for the next sort of 48 hours or so." While moves in the dollar have been more subdued this week, the currency has yet to recover from its steep losses on Friday, when it clocked its largest one-day percentage fall in nearly four months following an alarming jobs report. Against a basket of currencies, the dollar was last down 0.07% at 98.666 , still some distance away from its peak of 100.25 hit on Friday before the nonfarm payrolls figures. Traders continue to price in a 86.5% chance of a Fed cut in September, with about 56 basis points worth of easing expected by the year-end. But data such as Tuesday's services ISM report underscore the fine line the Fed has to tread, as policymakers weigh rising price pressures from Trump's tariffs against signs of a weakening U.S. economy. "The services ISM has obviously got that kind of stagflationary whiff about it... that's obviously a bit of a two-edged sword in terms of what does that mean for policy," said NAB's Attrill. "At the moment, I think we're sort of the view that maybe there's a bit too much confidence in the market about the certainty of a September move." U.S. Treasury yields moved slightly higher, rising by 1.6 - 2.8 basis points across the curve, after a $58 billion auction of 3-year notes , which was seen as somewhat soft by analysts, with demand equivalent to 2.53 times the notes on sale. More supply will hit the market this week with $42 billion in 10-year notes on Wednesday and $25 billion in 30-year bonds on Thursday. In other currencies, the Australian dollar rose 0.4% to $0.6494, while the New Zealand dollar gained 0.4% to $0.59255. The Indian rupee appreciated 0.2%, and was little changed after the Reserve Bank of India held its key repo rate steady at 5.5% as expected by a large majority of economists in a July 18–24 Reuters poll, following a surprise 50 basis point cut in June. New Zealand's jobless rate rose slightly in the second quarter as the labour market remained soft, data on Wednesday showed, supporting the view that the central bank will proceed with a flagged 25 basis-point interest cut at its August policy meeting. https://www.reuters.com/world/middle-east/dollar-drifts-investors-await-fed-governor-replacement-2025-08-06/

2025-08-06 04:44

Japan must balance budget, cut spending, LDP's Kono says Calls for big spending, tax cuts keeping bond market volatile Veteran lawmaker says era of 'Abenomics' is over TOKYO, Aug 6 (Reuters) - Japan must balance its budget and push the central bank to raise interest rates to alleviate concern over the country's finances, Taro Kono, touted as a candidate to become the next prime minister, said on Wednesday. Kono also criticised former Prime Minister Shinzo Abe's "Abenomics" reflationist policies, saying the country needs to shift to policies that focus more on structural reforms and cuts to government expenditure. Sign up here. The remarks by Kono, a former minister in charge of digitalisation, pit him against Sanae Takaichi, another candidate vying for the premiership, who has advocated in favour of big spending and loose monetary policy. "The size of the budget has been growing and growing, so it's time for us to say we really need to balance the budget," cut unnecessary expenditure and streamline the social security system, Kono told a news briefing at the Foreign Correspondents' Club of Japan. Political calls to cut taxes and boost payouts would also increase the budget deficit, a concern that has heightened volatility in the bond market, he said. "That's why I've been saying the government needs to ask the Bank of Japan to raise interest rates and in return, the government will streamline expenditure and try to balance the budget," he said. Kono, a veteran lawmaker who has also served as foreign minister, ran unsuccessfully in the ruling Liberal Democratic Party's (LDP) leadership race last year where incumbent premier Shigeru Ishiba won. The LDP's huge loss in last month's upper house election has led to growing calls from within the party for Ishiba to step down, and to hold another race to choose a new leader. Kono's hawkish fiscal stance makes him an outlier in Japan's current political circle, where most ruling and opposition party lawmakers favour boosting spending to support a fragile economy. Kono said Abenomics - a policy introduced by deceased former premier Abe in 2013 that combines massive monetary stimulus, flexible fiscal spending and a growth strategy - focused too much on reflating the economy. With the economy out of deflation and experiencing rising inflation, Japan needs a new economic policy that puts more emphasis on structural reform, he said. "There are still people in LDP, mostly former members of the Abe faction ... who still don't want to say the age of Abenomics is over," Kono said. "I think they are wrong. We definitely need to bring in structural change." https://www.reuters.com/markets/asia/japans-veteran-lawmaker-kono-urges-boj-raise-rates-2025-08-06/

2025-08-06 04:31

A look at the day ahead in European and global markets from Stella Qiu From economic data to corporate earnings, the anticipated impact of President Donald Trump's tariffs is finally showing up for all to see, but stock investors don't seem too concerned. Sign up here. Data showed the U.S. service sector hit stalling speed in July as employment further weakened and input costs climbed by the most in nearly three years. Combined with a brutal jobs report on Friday, that rekindled stagflation fears and put the Federal Reserve in a tough spot. U.S. earnings results, though they have been generally upbeat in the second quarter, are starting to show clearer tariff impact. Caterpillar (CAT.N) , opens new tab warned that U.S. tariffs would cost it up to $1.5 billion this year and Taco Bell parent Yum Brands (YUM.N) , opens new tab cautioned against higher costs and muted consumer demand. Even AI chip stock Advanced Micro Devices (AMD.O) , opens new tab reported disappointing data center revenue, sending its shares down 6.6% after the bell. That is one reason that equity markets have turned cautious, with investors caught in the tug of war between still robust earnings and tariffs. Judging by the impressive bounce in shares following U.S. jobs figures, it seems buying the dip still wins for now. The other big news of the day is ChatGPT maker OpenAI, which is in early talks for a potential secondary stock sale, valuing the company at around $500 billion, Reuters reported. In Asia, most shares were in the red but Japan and Australia outperformed with a gain of about 0.6%. Wall Street futures recovered from an earlier dip, with the Nasdaq futures up 0.1% and S&P 500 futures rising 0.2%. European stock futures are bracing for a higher open, with EUROSTOXX 50 futures up 0.3%. Currencies have moved little, with the dollar struggling to recover from the jobs-induced slump on Friday. All eyes are on Trump's pick to fill a coming vacancy on the Federal Reserve's Board of Governors. Trump said the decision will be made by the end of the week, while ruling out Treasury Secretary Scott Bessent as a contender to replace the current chief Jerome Powell, whose term ends in May 2026. The Treasury market braced for a $42 billion auction of 10-year notes after a three-year auction went poorly on Tuesday. Key developments that could influence markets on Wednesday: -- Euro zone retail sales for June -- U.S. 10-year Treasury bond auction -- Earnings results from Disney, Uber, McDonald's Trying to keep up with the latest tariff news? Our new daily news digest offers a rundown of the top market-moving headlines impacting global trade. Sign up for Tariff Watch here. https://www.reuters.com/world/china/global-markets-view-europe-2025-08-06/

2025-08-06 04:22

MUMBAI, August 6 (Reuters) - The Indian rupee inched up on Wednesday, notching small gains before the central bank's policy decision, set against the backdrop of fresh trade frictions with the United States. The rupee was quoted at 87.74 against the U.S. dollar at 09:42 am IST, up from 87.80 on Tuesday. The Indian currency recovered despite losses in most Asian peers. Sign up here. "At these levels, the rupee will move on its own momentum and today’s decision adds another layer," a currency trader at a private bank said. "Markets are firmly positioned for no change in rates, especially after U.S. tariff developments. A rate cut now would be a real surprise and could trigger a decent reaction." The Reserve Bank of India will announce its interest rate decision at 10:00 a.m. IST. A majority of economists in a Reuters poll expect the key policy rate, which stands at 5.50%, to remain at the same level. Major lenders, including State Bank of India and ICICI Bank, are calling for a rate cut, citing the need to support growth. The RBI’s policy decision comes at a time of escalating trade tensions between India and U.S. following President Donald Trump’s fresh threat of substantial tariffs over India’s continued purchases of Russian oil. The remarks have unnerved markets and added pressure on the rupee, which was within a whisker of its all-time low of 87.95 on Tuesday. With uncertainty around how far Washington might go on tariffs, traders are closely watching how much the central bank will factor in these external risks while framing its policy guidance. https://www.reuters.com/world/india/rupee-claws-back-ground-ahead-central-bank-rate-call-us-tariff-risks-linger-2025-08-06/

2025-08-06 03:28

Kugler's open Fed governor seat is a "pleasant surprise," Trump tells CNBC Person who fills Kugler's seat may also be Fed chief nominee Bessent ruled out because he wants to stay in top Treasury job WASHINGTON, Aug 5 (Reuters) - U.S. President Donald Trump said on Tuesday he will decide on a nominee to fill a coming vacancy on the Federal Reserve's Board of Governors by the end of the week, and had separately narrowed the possible replacements for Fed Chair Jerome Powell to a short list of four. "I'll be making that decision before the end of the week," Trump said of his plans to name a replacement for Fed Governor Adriana Kugler, who last week unexpectedly announced she was leaving as of this Friday to return to her academic position at Georgetown University. Sign up here. Trump, in comments to reporters at the White House, distinguished between picking Kugler's replacement for a term that only lasts until January, and the selection of Powell's replacement once he leaves the top Fed job in May. But with the Fed board's other seats occupied with people, including Powell, whose terms run for years longer, Trump's choice of Kugler's replacement could have implications for his selection of a chair, a process Trump said has been narrowed to economic adviser Kevin Hassett, former Fed governor and Trump supporter Kevin Warsh, and two other people. Trump did not name those people, but one is thought to be current Fed Governor Christopher Waller. "We're also looking at the Fed chair, and that's down to four people right now ... Two Kevins and two other people," Trump said. Trump earlier in the day said in an interview with CNBC that he had removed Treasury Secretary Scott Bessent from consideration for Fed chair because Bessent wanted to remain in the top Treasury job. In the CNBC interview, Trump said Kugler's decision to vacate her seat early was a "pleasant surprise" that gives him an immediate opening to fill with a person who could also be promoted to take Powell's place. Kugler's replacement would, at least initially, be appointed for just the few months remaining in Kugler's term. But Trump could be explicit he plans for that person to then be nominated to a full 14-year term after that time, and to also be his choice to replace Powell, giving his nominee several months and several policy meetings to begin to influence the policy debate. "A lot of people say, when you do that, why don't you just pick the person who is going to head up the Fed? That's a possibility too," Trump said in the CNBC interview. The president has been critical of Powell for not cutting interest rates since Trump returned to power in January, and contemplated trying to fire him, even as Fed policymakers balance evidence of both a slowing economy and a weakening job market against the fact inflation remains well above the central bank's 2% target and is expected to move higher. The Fed is charged by Congress to maintain stable prices and maximum employment, and is potentially facing a situation where the two goals conflict with each other, posing a painful set of tradeoffs. The nominee to fill Kugler's seat will need to be confirmed by the Senate, and would require another Senate vote for a full 14-year term early next year. The nomination for the next Fed chief would require a separate Senate confirmation process. James Fishback, the CEO of Azoria investment firm and a former advisor at efficiency department DOGE, spoke to Trump on Monday to pitch himself as a temporary Fed pick, and a presidential aide requested informative material from him, according to a source with knowledge of the interactions. The White House did not immediately respond to a request for comment about Fishback. 'ANOTHER LEVEL OF PROBLEMS' Kugler's departure was announced the same day Trump, angered over data that showed job growth slowing in the first months of his administration, fired Bureau of Labor Statistics Commissioner Erika McEntarfer while alleging without evidence that BLS was manipulating the jobs data to make him look bad. Economists have warned since Trump returned to the White House in January that his combination of import tariffs and erratic trade policy would likely lead to a labor market slowdown and higher inflation, a broadly shared outlook that has been among the factors keeping the Fed from lowering rates until the inflation impact becomes clearer. The central bank last week held its policy rate steady in the 4.25%-4.50% range, though Waller dissented on the grounds the inflation risk from tariffs appeared modest at best, while the job market and growth in general appeared to be weakening. The release on Friday of the jobs report for July, with weak monthly employment gains and downward revisions to prior months, appeared to validate those concerns and led to increased market bets the Fed would cut rates at its September 16-17 meeting. The firing of the BLS commissioner touched off a global wave of concern about the continued integrity of U.S. government data, with Trump's actions being given a fire-the-messenger interpretation by much of the economics and statistics community. The president's choice now to head the statistics agency and potentially to lead the Fed will be scrutinized all the more carefully, said Michael Strain, director of economic policy studies at the conservative American Enterprise Institute. "Imagine if one of your concerns is that there's a lackey in charge of the agency and the numbers are fake. That's ... another level of problems," Strain said of the BLS. "Maybe he sees this independence thing really matters. Maybe he's got somebody from the outside saying 'Look, Mr. President, if you appoint somebody who's perceived to be a lackey as the Fed chair, take the BLS freakout and multiply by 1,000." https://www.reuters.com/world/us/trump-set-fill-fed-board-vacancy-by-weeks-end-has-narrowed-chair-search-four-2025-08-05/

2025-08-06 03:00

MUMBAI, August 6 (Reuters) - The Indian rupee is likely to remain under pressure ahead of the central bank's interest rate decision on Wednesday, after nearing an all-time low following President Donald Trump's fresh threats of steep tariffs on Indian goods. The 1-month non-deliverable forward suggests the rupee will open slightly weaker against the U.S. dollar from Tuesday’s level of 87.80. Sign up here. The currency dropped as much as 87.8850 on Tuesday, just shy of its record low of 87.95 hit in February. Bankers said the rupee avoided hitting a fresh lifetime low, thanks to likely dollar sales by the Reserve Bank of India through state-run banks. The central bank had to step in after the rupee slid following Trump's threat of substantial tariffs on Indian goods over Russian oil purchases. "The RBI probably wanted to avoid headlines about the rupee hitting a new low on the same day Trump was ramping up tariffs," an FX trader at a private bank said. "87.90–88 is the key zone to watch. If the RBI does cut rates today, we'll most likely break past that, and the central bank may allow some weakness." About three-quarters of the 57 participants in a Reuters poll expect the RBI to leave the policy rate unchanged at 5.50%. The rest anticipate a 25-basis point cut, following a larger-than-expected 50-bp reduction in June. Citibank, ANZ, DBS, State Bank of India and ICICI Bank are among those expecting a rate cut. At the previous policy, SBI was the only one to predict a 50-bps reduction. Monetary policy operates with lags, and postponing a rate cut until inflation falls further or growth weakens more visibly could result in deeper and more persistent economic damage, SBI said in a note. "We expect RBI to continue frontloading with a 25 bps cut in August policy." KEY INDICATORS: ** One-month non-deliverable rupee forward at 87.94; onshore one-month forward premium at 11.25 paise ** Dollar index up at 98.78 ** Brent crude futures up 0.6% at $68.1 per barrel ** Ten-year U.S. note yield at 4.22% ** As per NSDL data, foreign investors sold a net $224.9 million worth of Indian shares on August 4 ** NSDL data shows foreign investors bought a net $45.9 million worth of Indian bonds on August 4 https://www.reuters.com/world/india/us-tariff-threat-keep-rupee-ropes-ahead-rbi-rate-call-2025-08-06/