US And Europe May Announce Tariff Truce

A political consequence is Prime Minister Suga has a limited window to improve his standing ahead of the LDP conference in September and a possible leadership challenge ahead of the October general election. His support for the Olympics has not helped. It is not so much about it being a super-spreader event, it could be a costly and dangerous distraction, and it is terribly unpopular. The marathon, for example, is to be run in Hokkaido. The US nation track and field team canceled a workout nearby Tokyo for health concerns. Still, opposition to the LDP is weak and fragmented. Its leadership contest will likely decide the next prime minister.  

The US dollar is trading slightly heavier against the Japanese yen for the third consecutive session. However, the losses have been modest. After peaking near JPY109.90 last Thursday, the greenback recorded a three-day low near JPY109.15 today. It appears to have found a bid in the European morning, and nearby resistance is seen in the JPY109.40-JPY109.50 area. The Australian dollar initially edged higher, reaching about $0.7785, before faded and slipping lower. There are options for around A$1.4 bln struck in the $0.7755-$0.7760 area that expire today. Initial support is seen around $0.7735. The Chinese yuan slipped marginally lower after snapping a five-week advance. The PBOC set the dollar's reference rate at CNY6.4307, back in line with market expectations, after seemingly using it to lean against continued yuan strength. The PBOC money market operations rolled over maturing amounts, which seemed supportive of the interest-rate sensitive financial assets. 

Europe

Although the vaccines appear to be effective against the rapidly spreading Indian mutation of Covid 19, it impacts the UK. It reportedly will cut the time between the first and second doses to eight weeks from 12. The next phase of the re-opening, though, goes into effect today with looser restrictions on indoor and outdoor activities. The UK plans are for economy-wide re-opening on June 21, and there is some fear that the mutation will change push it back. However, the political will is strongly in favor of going forward, and instead are encouraging to speed up the vaccine availability in hard-hit areas. Meanwhile, the DUP's newly elected leader Poots vowed to strip away parts of the Brexit trade pact that imposes custom checks between Northern Ireland and Britain.  

The first pushback against the US support for a global minimum corporate tax appears to be coming from the UK. Chancellor of the Exchequer Sunak is concerned that the 21% rate may be too high, even though he has proposed raising the UK corporate tax rate to 25%. Instead, the UK's Treasury wants the multinational companies to pay more taxes in the countries in which they sell their products and services.  

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Read more by Marc on his site Marc to Market.

Disclaimer: Opinions expressed are solely of the author’s, based on current ...

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