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Dollars slide on trade and tax concerns
As June began, the U.S. Dollar plunged to its lowest level since six weeks. Concerns about U.S. Tariffs were back in the spotlight after the legal confusion of last week and rising military tensions around the world. The euro was the leader, unfazed by the prospect that the European Central Bank would cut interest rates again on Thursday. The new German chancellor Friedrich Merz will visit Washington on Thursday to meet U.S. president Donald Trump as trade negotiations between Europe and America continue to be closely watched. The dollar is susceptible to fears of foreign capital flight as markets are still concerned about the U.S. Fiscal Bill that is currently being debated in the Senate. This bill gives the administration the ability to tax companies and investors who come from countries with 'unfair' foreign taxes. On Monday, the focus was back on tariffs. It seemed that President Donald Trump would push for levies in some way despite last week's legal opposition. After the weekend, Trump's plan of doubling duties on import steel and aluminum from Wednesday to 50% hit the greenback as Beijing retaliated against allegations that it had violated an agreement regarding critical minerals shipments. The weekend was marked by geopolitical tensions of great importance and bellicose threats. Gold rose. Pete Hegseth, the U.S. Secretary of Defense, warned his Indo-Pacific allies on Saturday to increase their spending on defence. Ukraine-Russian war continues to rage. Ukrainian drones continue to strike dozens of Russian aircraft deep within Russian territory. Gaza's conflict is not ending. The major countries are building weapons at a rapid pace. Britain is expanding its fleet of nuclear-powered attack subs as part a review of defence, aimed at preparing the country for modern warfare and countering the Russian threat. The oil price rose by about 3% Monday, after the producer group OPEC+ maintained its output increase in July at the level of the previous two month. There was some good news on the interest rates front in a week that saw a lot of data from the U.S. Labor Market. Federal Reserve Governor Christopher Waller stated on Monday that further rate cuts are possible in the second part of the year. Waller said that since the rise in inflation pressures linked to Trump's increased import taxes is unlikely to persist, he supports looking past any tariff effects to near-term-inflation in setting policy rates. As expected, China's manufacturing sector shrank in May for the second consecutive month. After Karol Nawrocki, the nationalist candidate of the opposition won the second round in the presidential elections, stocks in Poland fell by 1.4%. Before Monday's bell rang, U.S. stocks futures were down by about half a percentage, and so too were stocks in Europe, Japan, and other parts of the world. The yields on U.S. Treasury bonds have risen again. The column today looks at this week's major monetary decision made in Europe. It is widely expected that the European Central Bank will lower rates for an eighth time during the cycle, but the euro has risen regardless. EURO CONUNDRUM: ECB FACES SURGING EURO DISCONNORDRUM The euro continues to rise while the European Central Bank is cutting rates. This is because a capital reversal in the US has thrown off the relative rate shifts, and could force the ECB to further ease. It is expected that the ECB will lower its main lending rate to 2% on Thursday, which would be half of what it was a year ago at its highest point and less than half of the Federal Reserve's equivalent. The central bank has also returned to a level it considers to be 'neutral,' meaning that the rate does not either stimulate or rein in the economy. For the first time since almost two years, real, or inflation adjusted, ECB interest rates will return to zero. It's amazing that the euro, after eight consecutive ECB rate cuts and the prospect of zero real rates or even negative ones in the future, has risen more than 10% against a dollar basket and 5% against a currency basket based on the major trading partners of the Euro Zone. The nominal effective euro index has reached record levels, while the "real" version is at its highest level in over 10 years. The euro/dollar rate has risen despite no change in the difference between the yields of two-year government bonds on either side. This is usually a reliable indicator for changes in the exchange rate. This trend is largely due to Donald Trump's trade wars, the fear of capital flight out of dollar assets because of a variety of concerns regarding U.S. institutions and policies, and Germany's historical fiscal boost. The ECB is in a quandary if, as many believe, even a fraction (or fractions) of the trillions dollars of European capital invested in the United States are indeed returning home. How can it manage both the deflationary and domestic demand effects of a currency increase that is so rapid? The euro is not affected by the possibility of future rate cuts. The majority of ECB observers expect one or even two more rate cuts after Thursday, while money markets are predicting a 'terminal' rate of around 1.75%. This is the low end in the ECB range estimated as 'neutral. If the majority of capital repatriation is from equity investments in the U.S., lower ECB interest rates could even increase the outflows by boosting growth prospects for cheaper European stocks. Higher borrowing in Germany and across Europe should also sustain fixed income returns over the long term, increasing the pool of "safe" investments. 'GLOBAL EUROMOMENT' The ECB may protest about 'excessive gains' in the euro, but the impact could be limited unless they are prepared to back up their words with actions. There is also a chance that it could backfire because of the reasons mentioned above. The ECB is encouraging investment and the euro as a currency of reserve, in part, to meet the massive capital requirements for retooling the military, digital, and energy sectors. Christine Lagarde, ECB head, said in a speech last week in Berlin that there is an opportunity for a global euro moment, where the single currency can be a viable alternative to dollars, bringing immense benefits to the region if the governments are able strengthen the financial and security infrastructure of the bloc. A soaring currency rate during a trade conflict may seem like a good thing, but it will cause some concern among the major exporting countries in the region. ECB hawks, doves, and others will have to decide whether the continued easing of monetary policy to counter disinflationary risks is only stoking domestic inflation in the long run. Not to mention the fiscal boost that's coming next year. It is clear that the ECB will take into account in its new economic projections, due to be released on Thursday, the 7% increase in the euro/dollar rate and the near 10% decline in the global oil price since the last set of forecasts made in early March. Morgan Stanley economists believe that even if central bank raises core inflation forecasts, headline inflation could still fall short of the 2% target between mid-2025 and early 2027. This is even though the GDP growth outlook for 2025 has been revised upwards. At this point, it is impossible to make any predictions. Few central banks or major traders have any idea where the U.S. trade war or tariffs will lead. The ECB is unlikely to be able to cap the Euro, as global trade and investments are a source of anxiety. The ECB is faced with a big dilemma: whether to maintain the status quo or ease up even further. The chart of the day shows how tariff-related import distortions have distorted U.S. Gross Domestic Product readings this year. Last week, models that track GDP inputs were again jarred when a sharp contraction of the goods trade deficit in April occurred as the front-running imports to beat the tariffs in the 1st quarter faded. According to the Census Bureau of the Commerce Department, with many tariffs in effect, imports plummeted, helping to reduce the goods trade surplus by 46%, to $88 billion. Imports dropped $68 billion, to $276 billion. Exports rose $6.3 to $188.5. If the goods deficit shrinks, the net trade component in GDP calculations could spur significant growth in this quarter. It is similar to how it reduced Q1 GDP by a record-breaking 4.9 percentage points. The Atlanta Federal Reserve’s ‘GDPNow’ tracker is now boosted by the trade figures. It sees an impressive 3.8% real GDP increase in Q2. There is still caution. There is caution. Businesses don't appear to be restocking. Wholesale inventories were unchanged last month, and retail stocks fell by 0.1%. Stockpiles are expected to drop dramatically over the rest of the quarter. Watch today's events * US manufacturing surveys for May from S&P Global and ISM (0930EDT), as well as April construction spending (1000EDT). * Federal Reserve chair Jerome Powell opens Fed event in Washington. Fed Board Governor Christopher Waller and Dallas Fed President Lorie Log speak. Chicago Fed President Austan Gollisbee also speaks. Bank of England policymaker Catherine Mann also speaks. * US corporate earnings: Campbell's The opinions expressed are solely those of the authors. These opinions do not represent the views of News. News is committed to the Trust Principles and therefore, integrity, independence and freedom from bias.
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US copper futures rise as tariff fears loom
U.S. Copper Futures soared by nearly 6% Monday, increasing their premium over London Prices amid growing speculation about new import tariffs after President Donald Trump’s latest aluminum trade measures. Trump announced on Friday that he would increase the tariffs on steel and aluminum imports to 50%, up from 25%. U.S. Comex Copper Futures rose 5.7% to $4.9175 a pound. This is the highest price since April 3. The benchmark three-month copper price on the London Metal Exchange rose by 1.1% at $9,597.50 a metric ton as of 0944 GMT. The COMEX premium over the LME, a global benchmark price, has widened from $759 per ton to $1,231 a ton on Friday. Tom Price, Panmure Liberum analyst, said: "Although the word copper was not mentioned in Trump's announcements last week the markets have clearly priced in the possibility of tariffs after the February investigation. This shows the strong demand for the metal from investors." In February, Trump launched a probe to determine whether new tariffs could be imposed on imports of copper, a critical metal for electric vehicles, military equipment, and semiconductors. LME aluminium remained steady at $2.443.50 per ton after having touched its lowest level in May at $2.425.50. The U.S. Midwest Aluminium Premium jumped 54% since Friday, to $0.58/lb ($1,279 per ton). Goldman Sachs said in a report that the U.S. Midwest Aluminium Premium would increase to $0.68-0.70/lb if higher metals tariffs are implemented and remain in place. Lead increased by 0.9% to $1975, Zinc gained 1.7% at $2,663.50. Tin rose by 0.8% to $30,600, and Nickel was up 0.9%, to $15,365. The softer dollar made metals more accessible to holders of other currencies. Neil Welsh, Britannia Global Markets' head of metals, explained that the Dragon Boat Festival in China was responsible for the low Asian participation on Monday. Reporting by Ashitha Shivprasad from Bengaluru, and Polina Deitt in London. Editing by Kirby Donovan.
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The US beef market could be affected by the presence of flesh-eating worms in cattle
Experts say that the New World Screwworm is a parasite that has been eating cattle and wild animals alive for years. It is now moving northward from Central America towards Mexico, and it has surpassed biological barriers which had kept this pest in check for decades. Washington stopped cattle imports in May due to the spread of the insect into Mexico. This was about 700 miles away from the Texas border. The U.S. herd is already at its lowest level in decades, and the closure of the border could increase beef prices to record levels by preventing more calves from entering the U.S. supply. What is New World Screwworm? Screwworms, parasitic flies that lay their eggs in the wounds of warm-blooded animals. Usually, wild and livestock animals are the victims. After hatching, screwworm larvae burrow into living flesh with their sharp teeth. They feed, increase the size of the wound, and can eventually kill their host without treatment. A tiny scratch, a brand that has recently healed, or an ear tag that is healing can become a large wound covered with maggots, which puts the whole herd at risk. Researchers began releasing large numbers of male screwworm flies in the 1960s, which mated with wild female screwsworms and produced infertile eggs. Why is this important to U.S. customers? Every year, the U.S. imports more than a million beef cattle from Mexico. The suspension of imports will probably contribute to higher beef prices, as it will tighten the supply after ranchers were forced to reduce their herds due to drought. Experts said that the U.S. price of beef was likely also boosted by a separate suspension in imports from Mexico due to screwworms, which lasted between November and February. The upward pressure on prices is expected to continue through summer grilling. Experts say that Mexican cattle are typically fed and fattened in the United States for five to six month before slaughter. A reduced slaughter rate could increase beef prices. Even though the fly is thousands of miles from the border, an outbreak in the U.S. could further restrict the cattle supply as well as put household pets and other livestock at risk. Dr. Timothy Goldsmith is a professor of veterinary medicine at the University of Minnesota. He said that screwworms can feed on humans. Goldsmith explained that homeless people are more susceptible to infestations because they often sleep outdoors and lack access to hygiene and medical products. What steps are being taken to contain the outbreak? One factory in Panama that breeds and sterilizes screwworms releases 100 million sterile fly every week. But experts say there are more factories needed to stop the spread of this fly north. Sonja Swiger is an entomologist from Texas A&M University. She said that screwworms can't fly much more than 12 miles, but when they burrow inside their hosts, they can travel a great distance. In Panama and Mexico the flies are already past the narrowest land stretches, so it is necessary to release a large number of sterile flies to stop the outbreak. The U.S. Department of Agriculture (USDA) announced on Tuesday that it will invest $21,000,000 to convert a fruit flies factory in Mexico into a facility for the production of sterile screwworms. The agency stated that the border would likely be reopened to cattle imports before the end of this year. What could be the impact on American cattle ranchers if this happens? According to the USDA, a screwworm epidemic in Texas would cost $1.8 billion due to livestock deaths, costs of labor and medication. Most cattle ranchers are no longer equipped to diagnose or treat screwworm after decades of eradication. Treatment involves the removal of hundreds of larvae from wounds and thorough disinfection. This is a laborious, expensive and time-consuming process. This is a pest that we do not want to see again. David Anderson, a livestock economist at Texas A&M University, said that this was a bad situation. I can't even imagine dealing with it. It's gross." Reporting by Heather Schlitz. (Editing by Emily Schmall, David Gregorio and Emily Schmall)
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Tunisian national killed by neighbor in south of France
The Draguignan prosecutor announced in a press release that a Tunisian citizen was killed by his neighbor in the south France. He added that the incident is being investigated as an act of racial violence. The victim was shot dead late Saturday night, in Puget-sur Argens. He was described as "possibly" 35 years old, but his identity has not yet been confirmed. The man also shot a 25-year old Turkish national in the hand and took him to hospital. This incident occurs one month after Aboubakar, a 22-year-old Mali man, was fatally stabbed in a mosque of the southern French town of La Grand-Combe. Racism is on the rise in France. According to data released in March, the French police reported an increase of 11% in the number of racist, xenophobic, or anti-religious offenses in 2013. In a late Sunday statement, the prosecutor revealed that the 53-year old suspect was a sports shooter. The prosecutor said that he had posted racist and hateful content on his social networking account both before and after he killed his neighbor. France is home to the largest Muslim community in Europe. Its 6 million Muslims make up 10% of its population. Across the political spectrum, politicians, including President Emmanuel Macron have attacked what they call Islamist separatism, in a manner that rights groups say stigmatizes Muslims and amounts discrimination. (Reporting and editing by Kate Mayberry; Layli foroudi)
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ADNOC reduces Murban export forecast from August 2025 through May 2026
The company stated that Abu Dhabi National Oil Co. (ADNOC), has reduced its monthly forecast for Murban oil from August until next May in order to increase the processing at its refinery. ADNOC's August export forecast for the light Murban grade is 1.705 millions barrels per day, according to a report published by the company on Saturday. This is 65,000 bpd less than the previous forecast of 1.77 million. ADNOC has also reduced the forecast from September 2025 through May 2026, by between 100,000 and 177,000 bpd. However, forecast volumes for July and June 2025 remain unchanged. In the report, ADNOC said that the reduction was mainly due to feedstock optimization and increased Murban processing in its Ruwais facility. Murban exports were increased by the company as a result OPEC+ production increases which pushed crude prices down. The OPEC+ group, which includes the Organization of Petroleum Exporting Countries (OPEC) and its allies like Russia, has agreed to raise production by almost 1.4 million bpd from April to July.
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Gold reaches a one-week high as geopolitical and trade risks increase
Gold prices rose by nearly 2% on Monday to reach a new high. This was driven by demand for safe havens as President Donald Trump's renewed tariff threats and the escalating tensions in Russia and Ukraine increased global trade and geopolitical concerns. As of 0824 GMT spot gold rose 1.9% to $3,352.69 per ounce after reaching its highest level since the morning session. U.S. Gold Futures increased 1.9% to $3377.50. The dollar fell 0.5% against rival currencies after Trump announced late on Friday his intention to double import duties on steel and aluminum to 50%. Beijing also retaliated against allegations that it had violated an agreement regarding critical minerals shipments. The dollar's weakness makes gold more attractive to other currency holders. Treasury Secretary Scott Bessent announced on Sunday that Trump will soon meet with Chinese President Xi Jinping in order to resolve a dispute over vital minerals. Giovanni Staunovo is an analyst at UBS. He said: "I think risk-off (sentiment), with Asian equities down, is one factor. The other is the rising geopolitical pressures, including the escalation of tensions between Ukraine, and Russia, (which) is lifting demand for safe-haven assets like gold." Gold prices are supported by the ongoing trade tensions between China, US and Europe. Ukraine and Russia intensified their attacks in advance of the second round of peace talks to be held in Istanbul. This included a major Ukrainian strike as well as a Russian drone attack that occurred overnight. The Fed Chair Jerome Powell will speak in the U.S. later today. Markets are also looking forward to the speeches of several U.S. Federal Reserve officials during this week to get a sense of the outlook for monetary policy. In a low interest rate environment, gold, which is widely considered a safe haven during times of geopolitical or economic uncertainty, performs very well. Silver spot rose by 1.3%, to $33.42 per ounce. Platinum was down 0.4%, at $1,051.95, and palladium rose by 0.1%, to $972.25. (Reporting and editing by Janane Vekatraman in Bengaluru. Anushree mukherjee, Bengaluru)
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Salzgitter CEO warns that Trump tariffs will hit European industry hard
Salzgitter, Germany’s second largest steelmaker, warned on Monday that Washington’s tariff policy is a severe blow for European industry after the U.S. Administration announced plans to double steel import duties to 50%. In a written statement, Salzgitter CEO Gunnar Grbler stated that "the erratic tariff policies of the USA are hitting Europe's economies hard - particularly Germany". Salzgitter shares fell with its larger European peers Thyssenkrupp, ArcelorMittal and all of them between 0.5 to 2.1%. Groebler stated that in addition to direct tariffs imposed on exports of steel to the United States there is also an increased pressure on imports into the EU as a result rising volumes of cheaper Asian Steel entering Europe. According to the German steel association, around 4 million tonnes of European steel exported outside the EU were sent to the United States, making it Europe's most important market. Groebler stated that "a 50% increase in steel import duty in the USA should prompt the EU Commission's efforts to accelerate the implementation of the Steel and Metals Action Plan." (Reporting and editing by Friederike H. Heine, Tom Kaeckenhoff, Christoph Steitz)
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Maruti, India's largest carmaker, says China magnet curbs will not affect them immediately
Maruti Suzuki is India's largest car manufacturer. It said Monday that China's export restrictions on rare earth magnets - a key component - have no immediate impact on production. The company is also in discussions with the government about the issue. Reports say that auto manufacturers warned government officials in the last week of a possible production halt within days because of curbs. The new import process is complex and requires approval by Indian and Chinese officials, as well as documentation including certificates of end-use stating that the magnets were not intended for military use. Maruti said that they have submitted an import request and it is difficult to comment until they receive a response. "It's not a restriction. It's an endorsement of the end use. Rahul Bharti said to reporters that in the event of a problem, "we will... inform all our stakeholder, including stock exchange." China controls 90% of the global magnet processing capacity, which is used in many fields, including automobiles, appliances, and clean energy. In April, it enacted measures requiring import permits. The Society of Indian Automobile Manufacturers, in a meeting last month with officials from the commerce ministry, said that inventories of parts manufacturers are likely to be exhausted by the end of the month. The document, presented at a meeting in May attended by Maruti executives and others, said that the auto industry's production would come to a halt starting end-May or early-June. (Reporting and editing by Tom Hogue, Christopher Cushing, Aditi Sharma)
Oil settles up on Mideast tension, gains suppressed as rate of interest cuts pushed back
Oil settled greater on Wednesday as continuous tensions in the Middle East lent support to rates, but news that rates of interest cuts might start as late as December capped gains, following the Federal Reserve's statement concluding its twoday conference.
Brent unrefined futures settled 68 cents, or 0.83%,. higher at $82.60 a barrel, with U.S. West Texas Intermediate. ( WTI) crude futures up 60 cents, or 0.77%, to $78.50.
Prices had reduced more than 2% last week after OPEC and its. allies said they would phase out output cuts starting from. October.
Palestinian militant group Hamas has proposed various. changes, some unfeasible, to a U.S.-backed proposal for a. ceasefire with Israel in Gaza, U.S. Secretary of State Antony. Blinken stated on Wednesday, adding that conciliators were determined. to close the spaces.
At a press conference with Qatar's prime minister in Doha,. Blinken said a few of the counter-proposals from Hamas, which has. ruled Gaza given that 2007, had sought to change terms that it had. accepted in previous talks.
The war has yet to materially impact international oil supply, but. financiers have actually priced in the danger, improving unrefined futures. costs.
Meanwhile, financiers were left disappointed after the. Federal Reserve pushed out the start of rate cuts to maybe as. late as December, with authorities predicting just a single. quarter-percentage-point decrease for the year amidst increasing. quotes for what it will require to keep inflation in check.
U.S. consumer rate information, published on Wednesday, had. strengthened expectations of a Fed rate cut in September. Fed. Chair Jerome Powell will hold an interview later on. Wednesday.
It will be interesting to see what Powell states, I don't. think there is any doubt that they will leave rates where they. are, stated Ben McMillan, a fund manager for IDX Advisors.
Higher borrowing costs tend to moisten economic development, and. could, by extension, limit oil demand.
The marketplace is holding its breath today, said Tim. Snyder, economist at Matador Economics.
If Powell talks outside of what the Fed publishes, there. could be a little discord within the policy committee regarding. their instructions on rates of interest, Snyder included.
Elsewhere, European Reserve Bank Vice President Luis de. Guindos stated the ECB should move very gradually in lowering. interest rates, because of substantial uncertainty over the inflation. outlook.
U.S. unrefined stocks posted a surprise build last week, up by. 3.7 million barrels to 459.7 million barrels, compared to. expectations of a 1 million barrel-draw, the Energy Info. Administration (EIA) stated on Wednesday.
Gasoline stocks increased more than expected, up by 2.6 million. barrels to 233.5 million barrels, the EIA stated, compared with. analysts' expectations in a survey for a 900,000-barrel. develop.?
However, longer term, the EIA, the International Energy. Agency (IEA) and the Company of the Petroleum Exporting. Nations this week upgraded their views on the worldwide oil. demand-supply balance for 2024, forecasting decreases in worldwide. oil inventories.
Their reports suggest restricted disadvantage for costs in the. 2nd half of the year, stated Tamas Varga of oil broker PVM,. with the IEA seeing a larger depletion in stocks than the. other 2.
(source: Reuters)