A deal in Germany prompted the euro to gain and a dollar selloff Tuesday morning. China’s yuan got a boost from comments by a PBOC official that it would not use the currency in trade disputes. Markets are less concerned about trade entering into the Fourth of July holiday. West Texas Intermediate hits $75 per barrel for the first time since 2014.
Merkel’s win boosts euro
German Chancellor has had a week of ups and downs, but for now it appears she may have squashed the outcry from members of her coalition government to fix immigration.
After European leaders agreed to strengthen the exterior European Union border last week, Merkel (and the euro) were on the up and up, but that wasn’t enough for Christian Social Union leader Horst Seehofer, who then threatened his resignation as Interior Minister. However, it now seems Merkel has now found a solution for Seehofer.
Germany’s coalition government – comprised mainly of the CSU and Merkel’s Christian Democratic Union – agreed to set up holding centers on the German border for refugees already registered in other E.U. countries. Some E.U. members have agreed to take back asylum seekers rejected by Germany.
The deal, which still requires the support of junior coalition member the Social Democratic Party, helped the euro climb up from the lows of 1.159 Tuesday morning to as high as 1.167.
The dollar selloff continued and the euro was propped up by a better-than-expected producer price index for May.
GBP/USD climbs higher on construction PMI
The calmer mood around trade put the greenback on the back foot, allowing the pound to advance.
Cable climbed from around 1.311 to 1.319 Tuesday morning. The U.K. construction PMI surprised on the upside for June, coming out at 53.1 compared to estimates of no change at 52.5.
In the background, Brexit still weighs down the pound. Many businesses are still unclear about the future of the country and therefore investment in economic growth is lagging.
China’s yuan gets a reprieve
The Chinese yuan was reaching its lowest levels in 11-months, but received some help from the People’s Bank of China Tuesday.
Two PBOC officials said that China will not use the yuan as a weapon in the trade war with the United States, vowing to keep the currency stable.
Meanwhile, the Trump administration is moving forward with blocking Chinese companies from investing in the U.S. Most recently, the National Telecommunications and Information Administration said the FCC should block China Mobile Ltd. from entering the telecommunications market as a matter of national security.