Fri, Apr 19, 2019 @ 04:44 GMT

Fed Clarida: Inflation at lower end of range of price stability

    Fed Vice Chair Richard Clarida said in a speech that inflation is estimated to have been “a little bit below 2 percent of late”, largely because of “recent decline in energy prices”. But the better indicator of future inflation, core PCE, is estimated to have been “about 2 percent”. AT the same time, market-base measures of inflation compensation have “moved lower, on net”. Some survey-based measures of longer-term inflation expectations are little changed. Taken together, Clarida said “evidence suggests that measures of expected inflation are at the lower end of a range that I consider to be consistent with our price-stability goal of 2 percent PCE inflation.”

    But he also noted that “a number of crosscurrents that are buffeting the economy bear careful scrutiny”. He echoed Fed Chair Jerome Powell’s comments and pointed to slowing global growth, “in particular in China an Europe”, global policy uncertainty, volatile financial market conditions. And they are “making efforts to extract signal from noise more challenging.”

    Clarida also reiterated Fed’s position that “with employment and inflation now at or close to our dual-mandate objectives, the FOMC in its January statement indicated it can afford to be patient as we assess the need for further adjustments in our policy stance”.

    He added that going forward, Fed needs to be “cognizant of the balance we must strike between (1) being forward looking and (2) maximizing the odds of being right given the reality that the models that we consult are not infallible.”

    Clarida’s full speech here.

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    ECB Nowotny: It’s time for gradual normalization as inflation pressure will eventually materialize

      European Central Bank (ECB) Governing Council member Ewald Nowotny spoke in the European Money and Finance Forum (SUERF) today. .

      Regarding monetary policy, it reiterated that “it is time for a gradual normalization” as inflation pressure will eventually materialize. But he also emphasized that “this normalization requires a delicate balancing of measures as well as careful sequencing in time.” He noted that ECB is now at an “important turning point”. While the Eurozone has very strong economic expansion, it’s an unequal one.

      He stressed that the ECB framework is well equipped to cope with the evolving inflation debate. But still, exit is complex due to the large amount of stimulus in place. Nowotny also repeated all other central bankers have said over time. That is, tightening too soon would stifle recovery. Falling behind the curve would risk creating bubble in assets.

      On the topic of trade war, Nowotny warned of the “negative effects for all involved”. And, “the direct effects might be on the exchange rate side but this is difficult to see or to forecast because today we have so many linkages, we have long production chains… It might have negative effects on financial stability, but effects on monetary policy are not very clear.”

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      France PMI services revised down to 55.9, growth remained weak in Q2

        France PMI services was revised down to 55.9, from 56.4 in June, but up from May’s 54.3. PMI composite rose to 55.0, up from May’s 54.2.

        Trevor Balchin, Economics Director at IHS Markit which compiles the France Services PMI® survey, said:

        “French private sector expansion picked up in June, driven by a rebound in the services sector that more than offset a further slowdown in manufacturing output growth. Services activity has now outpaced goods production for the fifth month in a row.

        “The overall rate of output growth was the second-weakest since January 2017, however, and on a quarterly basis the reading for Q2 (55.4) was the weakest since the final quarter of 2016 (52.0). This suggests that economic growth may remain weak in the second quarter, after the latest official release of GDP data confirmed a sharp slowdown in the first three months of the year. GDP growth slowed to 0.2% quarter-on-quarter in Q1 2018, having trended at an impressive 0.7% throughout the previous five quarters.”

        Full France PMI services release.

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        Italy may adjust budget plan if markets react negatively

          Italian newspaper Il Messaggero reported today that the coalition government is prepared to adjust its budget plan should markets react negatively. For now, the government is sticking to its deficit target of 2.4% of GDP in 2019. And there could be a plan B for the government including redefining the key elements of the expansive budget. Those adjustments could even include retirements and basic income for the poor.

          European Commissions will discuss today what’s next regarding Italy, after formally getting its reply. It’s generally expected that the Commission will reject the budget and demand resubmission from Italy.

          EUR/USD’s weak recovery ahead of 1.1432 supprot today could be an reaction to the news. But it’s so far very weak.

          Italian 10 year yield is down -0.033 at 3.447 for the moment. It’s already way off last week’s high near to 3.8%. But German 10 year yield is currently at 0.445. Spread remains close to 300.

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          US-China joint statement vowing not to launch a trade war

            US and China issued a joint statement on Saturday to conclude the trade talks with Chinese Vice Premier Liu He on May 17 and 18. There was no mentioning of any number, but the statement said there were “consensus on taking effective measures to substantially reduce” US trade deficit in goods with China. And, China agreed to “significantly increase purchase” of US goods and services.

            Additionally, there would be “meaningful increases” in US agriculture and energy exports to China, “expanding trade” in manufactured goods and services, encouraging “two-way investment” with “fair, level playing field for competition”. China also pledged to work on laws and regulations on intellectually property protections.

            The Chinese State-owned Xinhua news agency described the statement as “vowing not to launch a trade war against each other”.

            Here is a graphical summary by Xinhua.

            Full statement below:

            THE WHITE HOUSE – Office of the Press Secretary
            FOR IMMEDIATE RELEASE – May 19, 2018

            Joint Statement of the United States and China Regarding Trade Consultations

            At the direction of President Donald J. Trump and President Xi Jinping, on May 17 and 18, 2018, the United States and China engaged in constructive consultations regarding trade in Washington, D.C. The United States delegation included Secretary of the Treasury Steven T. Mnuchin, Secretary of Commerce Wilbur L. Ross, and United States Trade Representative Robert E. Lighthizer. The Chinese delegation was led by State Council Vice Premier Liu He, Special Envoy of President Xi.

            There was a consensus on taking effective measures to substantially reduce the United States trade deficit in goods with China. To meet the growing consumption needs of the Chinese people and the need for high-quality economic development, China will significantly increase purchases of United States goods and services. This will help support growth and employment in the United States.

            Both sides agreed on meaningful increases in United States agriculture and energy exports. The United States will send a team to China to work out the details.

            The delegations also discussed expanding trade in manufactured goods and services. There was consensus on the need to create favorable conditions to increase trade in these areas.

            Both sides attach paramount importance to intellectual property protections, and agreed to strengthen cooperation. China will advance relevant amendments to its laws and regulations in this area, including the Patent Law.

            Both sides agreed to encourage two-way investment and to strive to create a fair, level playing field for competition.

            Both sides agreed to continue to engage at high levels on these issues and to seek to resolve their economic and trade concerns in a proactive manner.

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            US Mnuchin: We’re very focused on the EU trade relationship

              US Treasury Secretary Steven Mnuchin said the US is “very focused on the EU” on strengthening the trade relationship. He said that after Meeting of Trump and Juncker, there is an agreement in principal and the officials planned to move forward to “turn it into real agreement”.

              Both sides would immediately focus on steel and aluminum tariffs first “so that there can be no tariffs in either direction”. The issue is expected to be resolved “very quickly”. Mnuchin also said there is an outline already, “in agriculture, in chemicals, in medical devices, in industrial LNG” and so “we’re going to make a lot of progress.

              Regarding China, Mnuchin said “if they’re willing to make serious changes just as the EU did yesterday, we’ll negotiate with China any time.”

              And on NAFTA, he said “hopeful that we’ll have an agreement in principal in the near future.” He also noted that “whether it’s one deal or two deals, so long as we get the right agreement, we’re indifferent.”

              US Trade Representative Robert Lighthizer said that the US was close to reaching a broad agreement on NAFTA renegotiations. And he added that “we are in the finishing stages of achieving an agreement in principle that will benefit American workers, farmers, ranchers, and businesses.” And talks were being done at an “unprecedented speed”.

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              BoE Carney and Cunliffe to testify on financial stability at the Commons, live stream

                BoE Governor Mark Carney is going to testify on the Financial Stability report at the Commons. Deputy Governor Jon Cunliffe will be there too. Starts at 0800 GMT

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                Trump to announce new tariffs on China as soon as Monday, 10% instead of 25%

                  Reuters reported that, based on unnamed source, Trump is ready to announce the next round of tariffs on USD 200B in Chinese goods, as soon as on Monday. However, the tariff rate could be at 10%, which is much lower than the 25% rate Trump intended to impose. There is no comment from the White House on the news yet. At the same time, Treasury Secretary Steven Mnuchin is restarting trade talks with China, involving Vice Premier Liu He. But there is no detail the meeting, not even a date yet.

                  In the middle of last week, before the news that Mnuchin sent an invitation letter to China for talks, a massive new campaign against Trump’s tariffs was launched. The Americans for Free Trade campaign rode on the Farmers for Free Trade campaign. The multi-industry coalition consists of over 80 of the US leading trade associations, representing thousands of businesses and workers. It’s backed by a multi-million dollar campaign called Tariffs Hurt the Heartland.

                  The campaign include highlighting opposition to current and new tariffs through:

                  • Events in congressional districts across the country that bring together farmers, business owners and factory workers to discuss how tariffs are directly hurting them;
                  • Paid TV, radio and online advertisements highlighting how tariffs are affecting families, farmers, factory workers and businesses of all sizes;
                  • A rapid response “war room” that will fact check and respond to tariff announcements;
                  • Op-eds, blogs and statements from Americans bearing the brunt of tariffs;
                  • A digital media campaign explaining the economic harm of tariffs to a wide online audience; and
                  • Direct outreach to key members of Congress on behalf of grassroots voices from across the nation.

                  And it will kick off with events in Chicago, Nashville, Pennsylvania and Ohio.

                  Here are some links for your reference:

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                  ECB de Guindos: Challenges remain in the form of low trend growth

                    ECB Vice President Luis de Guindos said in a speech that Eurozone economy is “continuing to grow” and the growth is “broad-based across countries and sectors”. He added that “during this recovery, the countries that were most affected by the crisis have regained competitiveness thanks to a combination of accommodative monetary policy, fiscal consolidation and structural reforms.”

                    However, de Guindos warned that “challenges remain in the form of low trend growth compared with other advanced economies, and persistently high public and private debt levels in a number of euro area countries.”. He urged further efforts to “strengthen productivity growth and boost productive investments to lift long-term potential growth.”

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                    Japan automakers slam Trump’s tariffs as Abe kept silence

                      Japan Prime Minister Shinzo Abe has been so far very quiet regarding trade tensions with the US. Abe and his cabinet members have repeatedly said that they do not want bilateral trade agreements. But Trump is insisting to force Japan into it. And that’s not to mention that Japan was the only close ally that was not even given a temporary exemption on the steel and aluminum tariffs. It’s even unsure what retaliation they’ll take. The meeting between Abe and Trump ahead of G6+1 submit also produced no progress on trade.

                      But back in his homeland, Abe is facing increasing pressure on him to take a stance. The Japan Automobile Manufacturers Association issued a statement today slamming the US probe of automobile imports using national security as excuse again. In the statement, JAMA expressed “gravely concerned” of the investigation. It emphasized that “automobiles are sold to consumers on the basis of their own choices, and it is consumers themselves who would be penalized, through increased vehicle prices and reduced model options”. Additionally, “business plans of automobile and auto parts manufacturers as well as imported vehicle dealers could be seriously disrupted, with potentially adverse impacts on the U.S. economy and jobs.”

                      JAMA also pointed to “facts” that their member companies operate “24 manufacturing plants and 44 R&D/design centers in 19 U.S. states and in 2017, nearly 3.8 million vehicles were produced by American workers at those facilities.” “Of that total, over 420,000 units were exported to countries around the world, further underscoring our contributions to employment and economic growth in the United States.”

                      JAMA concluded that “free and fair trade and a competitive climate in line with global rules benefit consumers in the United States and strengthen the sustainable growth of the U.S. auto industry and its economy. We will continue to monitor this situation closely and to uphold the vital importance of free trade worldwide.”

                      Full statement here.

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                      UK PMI construction dropped to 50.6, growth shifted down a gear

                        UK PMI construction dropped to 50.6 in January, down from 52.8 and missed expectation of 52.6. That’s the slowest rise in business activity for ten months. Also, commercial work remains weakest performing area and employment growth hits two-and-a-half year low

                        Tim Moore, Economics Associate Director at IHS Markit, which compiles the survey:

                        “UK construction growth shifted down a gear at the start of 2019, with weaker conditions signalled across all three main categories of activity. Commercial work declined for the first time in ten months as concerns about the domestic economic outlook continued to hold back activity. The latest survey also revealed a loss of momentum for house building and civil engineering, although these areas of the construction sector at least remained on a modest growth path.

                        “Staff recruitment slowed to a crawl in January, with construction firms reporting the softest rate of job creation since July 2016. Delays to client decision making on new projects in response to Brexit uncertainty was cited as a key source of anxiety at the start of 2019. Difficulties converting opportunities to sales were reflected in a slowdown in total new business growth to its lowest since last May.

                        “Business expectations for the year ahead slipped to a three-month low and remained subdued in comparison to historic trends in January. Positive sentiment towards the outlook for civil engineering work remains a key factor helping to support business sentiment across the construction sector, according to survey respondents.”

                        Full release here.

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                        China CSRC Fang: Trump’s tactic won’t work with China

                          Fang Xinghai, vice chairman of the China Securities Regulatory Commission (CSRC) criticized that the Trump’s new round of tariffs on China has “poisoned” the atmosphere for negotiations. Fang also warned that “President Trump is a hard-hitting businessman, and he tries to put pressure on China so he can get concessions from our negotiations. I think that kind of tactic is not going to work with China.” Also, according to Fang, “if he puts tariffs on all Chinese exports to the United States – which he says he will – even in that scenario, the negative impact on China’s economy is about 0.7 percent.”

                          Separately, the South China Morning Post in Hong Kong reported, citing unnamed source, that China will not send delegation to the US for more trade talks after the new round of tariffs.

                          All in all, what’s next will depend on the outcome of Vice Premier Liu He’s meeting in Beijing on the issue.

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                          Australia AiG service index rose to 44.8, but all sectors contract

                            Australia AiG Performance of Service Index rose 0.3pts to 44.8 in March, indicating a “slower rate of contraction. But it’s still the third straight month of contractionary conditions following a positive run through most of 2017 and 2018. Despite the slight improvement, it’s should noted that it’s the first month since August 2010 that all sectors contract.

                            Also released, Australia trade surplus widened to AUD 4.80B in February, up from AUD 4.35B and beat expectation of AUD 3.71B. Total exports rose AUD 77M to AUD 39.83B. Total imports dropped AUD -374M to AUD 35.03B.

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                            Euro broadly lower after data miss, Sterling mixed ahead of BoE, EUR/GBP an interesting one to watch

                              Euro suffers broad based selling in the current 4H bar as seen in heatmap. It’s triggered by a string of data misses, that started from France PMIs, Germany PMIs and Eurozone PMIs. While German Ifo business climate beat expectation, it did dropped from 115.4 to 114.7 in March. Just as Markit economist said, growth in Eurozone should have peaked around the turn of the year already.

                              Meanwhile, Sterling is mixed ahead of BoE rate decision as traders turn a bit cautious. But it’s still generally firm as markets are anticipating a hawkish turn that might signal a May hike.

                              EUR/GBP will be an interesting one to watch in the come 2 hours. 6H action bias chart indicate clear downside momentum with the fall from 0.8967. However, D action bias chart showed that it’s just starting turn red in the last few bars. Also, as mentioned in our technical outlook reports, 0.8686 is a key support level, bottom of the multi-month range. It’s still unsure whether this level would be taken out. BoE will be the key.

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                              Yen falls broadly as BoJ strengthens the framework for continuous powerful easing

                                Yen is sold off sharply after BoJ announced the “Strengthening the Framework for Continuous Powerful Monetary Easing”.

                                10 year JGB yields hit as high as 0.115 earlier today but breaches below 0.07 after BoJ release.

                                On Yield Curve Control framework BoJ voted 7-2 on the following decision. Firstly, short term interest rate target is held unchanged at -0.1%. Secondly, 10 year JGB yield target is maintained at around 0%. But, “yields may move upward and downward to some extent mainly depending on developments in economic activity and prices”. The annual pace of monetary expansion is kept at around JPY 80T. BoJ also noted that “in case of a rapid increase in the yields, the Bank will purchase JGBs promptly and appropriately”.

                                Y Harada and G Kataoka dissented the above decision. Harada said allowing long term yields to move upward and downward was to some extent “too ambiguous”. Kataoka continued his push to broaden the target to JGB of 10-years and longer.

                                BoJ also added forward guidance on interest rate. It said “the Bank intends to maintain the current extremely low levels of short- and long-term interest rates for an extended period of time, taking into account uncertainties regarding economic activity and prices including the effects of the consumption tax hike scheduled to take place in October 2019.”

                                Full release here.

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                                USTR announced 10% tarrifs on Chinese imports, to increase to 25% on Jan 1 2019

                                  US Trade Representative finally announced the tariffs on USD 200B of Chinese imports, effective September 24, 2018. The initial tariff rate is 10%. Staring January 1, 2019, the tariff rate will be increased to 25%. The list of products covers 5745 lines of the original 6031 lines proposed back in July 10. 297 lines were fully or partially removed from the list. Products include consumer electronics, certain chemical inputs for manufactured goods, textiles and agriculture; certain health and safety products such as bicycle helmets, and child safety furniture such as car seats and playpens.

                                  The tariffs were part of the follow-up actions on Section 301 investigations. China’s unfair trade practices were repeated in the statement. These include, forced technology transfer, depriving UA companies to set market based terms in negotiations, unfairly facilitating systematic investment in acquisition of US technology companies, and cyber intrusions to US commercial computer networks for valuable business information.

                                  Trump warned in a statement that new round of tariffs on around USD 267B of additional imports will be pursued if China retaliates. He added that “we have been very clear about the type of changes that need to be made, and we have given China every opportunity to treat us more fairly.” “But, so far, China has been unwilling to change its practices.”

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                                  Juncker and Tusk: EU commits in solemn manner to avoid triggering Irish backstop

                                    European Commission President Jean-Claude Juncker and European Council President Donald Tusk sent a joint letter to UK Prime Minister Theresa May. That’s for hoping to provide the "assurances" to help May get the agreed Brexit deal through the UK Parliament tomorrow.

                                    In short, Juncker and Tusk pledged to try to reach the agreement regarding post-Brexit EU-UK relationship by the end of next year so as to avoid using the Irish backstop. They also emphasized that a commitment to speedy trade deal made by EU leaders had “legal value” which committed the Union “in the most solemn manner”.

                                    If the target date couldn’t be met, UK will have an option to extend a status-quo transition period, also for avoiding to trigger the backstop. They also pledged that “If the backstop were nevertheless to be triggered, it would only apply temporarily, unless and until it is superseded by a subsequent agreement that ensures that a hard border is avoided.” 

                                    Below is the full letter:

                                    Dear Prime Minister,

                                    Thank you for your letter of 14 January 2019.

                                    As you are well aware, we regret but respect the decision of the United Kingdom to leave the European Union. We also consider that Brexit is a source of uncertainty and disruption. In these challenging times, we therefore share with you the determination to create as much certainty and clarity as possible for citizens and companies in a situation where a Member State leaves the European Union after more than four decades of closest economic and political integration. That is why the Withdrawal Agreement that you and the Leaders of the 27 EU Member States agreed after long negotiations is so important. It represents a fair compromise and aims to ensure an orderly withdrawal of the United Kingdom from the European Union, thereby limiting the negative consequences of Brexit. That is also why we wish to establish as close as possible a relationship with the United Kingdom in the future, building on the Political Declaration, which the Leaders of the 27 EU Member States agreed with you. It is also why we want negotiations to this effect to start as soon as possible after the withdrawal of the United Kingdom from the European Union.

                                    As you know, we are not in a position to agree to anything that changes or is inconsistent with the Withdrawal Agreement, but against this background, and in order to facilitate the next steps of the process, we are happy to confirm, on behalf of the two EU Institutions we represent, our understanding of the following points within our respective fields of responsibility.

                                    A. As regards the President of the European Council:

                                    On the 13 December, the European Council (Article 50) decided on a number of additional assurances, in particular as regards its firm commitment to work speedily on a subsequent agreement that establishes by 31 December 2020 alternative arrangements, so that the backstop will not need to be triggered.

                                    The European Council also said that, if the backstop were nevertheless to be triggered, it would only apply temporarily, unless and until it is superseded by a subsequent agreement that ensures that a hard border is avoided, and that the European Union, in such a case, would use its best endeavors to negotiate and conclude expeditiously a subsequent agreement that would replace the backstop, and would expect the same of the United Kingdom, so that the backstop would only be in place for as long as strictly necessary.

                                    In this context, it can be stated that European Council conclusions have a legal value in the Union commensurate to the authority of the European Council under the Treaties to define directions and priorities for the European Union at the highest level and, in the specific context of withdrawal, to establish, in the form of guidelines, its framework. They may commit the European Union in the most solemn manner. European Council conclusions therefore constitute part of the context in which an international agreement, such as the Withdrawal Agreement, will be interpreted.

                                    As for the link between the Withdrawal Agreement and the Political Declaration, to which you make reference in your letter, it can be made clear that these two documents, while being of a different nature, are part of the same negotiated package. In order to underline the close relationship between the two texts, they can be published side by side in the Official Journal in a manner reflecting the link between the two as provided for in Article 50 of the Treaty on European Union (TEU).

                                    B. As regards the President of the European Commission:

                                    The Political Declaration agreed at the November Special European Council (Article 50) describes a future relationship of unprecedented depth and breadth, reflecting the continuing strength of our shared values and interests. The Withdrawal Agreement and the Political Declaration represent a fair balance of European Union and United Kingdom interests. They will ensure a smooth withdrawal and a strong future relationship in the interests of all our citizens.

                                    As the European Council has already stated, it will embark on preparations for a future partnership with the United Kingdom immediately after signature of the Withdrawal Agreement. As regards the European Commission, we will set up the negotiating structure for these negotiations directly after signature to ensure that formal negotiations can start as soon as possible after the withdrawal of the United Kingdom, having in mind the shared ambition of the European Union and the United Kingdom to have the future relationship in place by the end of the transition. Should national ratifications be pending at that moment, the Commission is ready to propose provisional application of relevant parts of the future relationship, in line with the legal frameworks that apply and existing practice. The Commission is also ready to engage with you on a work program as soon as the United Kingdom Parliament has signaled its agreement in principle to the Withdrawal Agreement and the European Parliament has approved it.

                                    There is an important link between the Withdrawal Agreement and the Political Declaration, reflecting Article 50 of the Treaty on European Union. As stated in Article 184 of the Withdrawal Agreement and reflected also in Paragraph 138 of the Political Declaration, the European Union and the United Kingdom have committed to use best endeavors, in good faith and in full respect of their respective legal orders, to take necessary steps to negotiate expeditiously the agreements governing their future relationship referred to in the Political Declaration.

                                    In light of your letter, the European Commission would like to make the following clarifications with regard to the backstop:

                                    The Withdrawal Agreement including the Protocol on Ireland/Northern Ireland embodies the shared commitment by the European Union and the United Kingdom to address the unique circumstances on the island of Ireland as part of ensuring the orderly withdrawal of the United Kingdom from the European Union. The Commission can confirm that, just like the United Kingdom, the European Union does not wish to see the backstop enter into force. Were it to do so, it would represent a suboptimal trading arrangement for both sides. The Commission can also confirm the European Union’s determination to replace the backstop solution on Northern Ireland by a subsequent agreement that would ensure the absence of a hard border on the island of Ireland on a permanent footing.

                                    The European Commission can also confirm our shared understanding that the Withdrawal Agreement and the Protocol on Ireland/Northern Ireland:

                                    – Do not affect or supersede the provisions of the Good Friday or Belfast Agreement of 10 April 1998 in any way whatsoever; they do not alter in any way the arrangements under Strand II of the 1998 Agreement in particular, whereby areas of North-South cooperation in areas within their respective competences are matters for the Northern Ireland Executive and Government of Ireland to determine;

                                    – Do not extend regulatory alignment with European Union law in Northern Ireland beyond what is strictly necessary to avoid a hard border on the island of Ireland and protect the 1998 Agreement; the Withdrawal Agreement is also clear that any new act that the European Union proposes should be added to the Protocol will require the agreement of the United Kingdom in the Joint Committee;

                                    – Do not prevent the United Kingdom from facilitating, as part of its delegation, the participation of Northern Ireland Executive representatives in the Joint Committee, the Committee on issues related to the implementation of the Protocol on Ireland/Northern Ireland, or the joint consultative working group, in matters pertaining directly to Northern Ireland.

                                    The European Commission also shares your intentions for the future relationship to be in place as quickly as possible. Given our joint commitment to using best endeavors to conclude before the end of 2020 a subsequent agreement, which supersedes the Protocol in whole or in part, the Commission is determined to give priority in our work program to the discussion of proposals that might replace the backstop with alternative arrangements. In this context, facilitative arrangements and technologies will be considered. Any arrangements which supersede the Protocol are not required to replicate its provisions in any respect, provided that the underlying objectives continue to be met.

                                    Should the parties need more time to negotiate the subsequent agreement, they could decide to extend the transition period, as foreseen in the Withdrawal Agreement. In that case, the Commission is committed to redouble its efforts and expects the same redoubled efforts from your negotiators, with the aim of concluding a subsequent agreement very rapidly. Were the backstop to enter into force in whole or in part, it is intended to apply only temporarily, unless and until it is superseded by a subsequent agreement. The Commission is committed to providing the necessary political impetus and resources to help achieving the objective of making this period as short as possible. To this end, following the withdrawal of the United Kingdom, and until a subsequent agreement is concluded, the Commission will support making best use of the high level conference foreseen in the Political Declaration to meet at least every six months to take stock of progress and agree the appropriate actions to move forward.

                                    Finally, in response to your concern about the timetable, we would like to make it clear that both of us will be prepared to sign the Withdrawal Agreement as soon as the meaningful vote has passed in the United Kingdom Parliament. This will allow preparations for the future partnership with the United Kingdom immediately thereafter to ensure that negotiations can start as soon as possible after the withdrawal of the United Kingdom from the European Union.

                                    Yours sincerely,

                                    Donald Tusk, Jean-Claude Juncker

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                                    EU responds strongly to Trump’s regrettable trade war rhetorics

                                      Trump’s hostile rhetorics against the EU seem to have draw strong reactions from the latter. European Commission President Jean-Claude Juncker points to the “ceasefire agreement” with Trump made just a month ago, and said he hoped Trump will refrain from imposing auto tariffs. However, Juncker warned that the EU won’t let others dictate its own trade policies. And, if Trump violates the deal impose auto tariffs, the EU will “also do that”.

                                      ECB Governing Council member Olli Rehn also urged Trump to stop the “regrettable” trade war rhetoric. And he warned that US exit from the WTO could damage international order. And he hit on Trump’s ungrounded claims and said ECB is certainly not manipulating the Euro. Rehn also defended China and said the Yuan is weaker because of trade war threat.

                                      Another ECB Governing Council member Ewald Nowotny also said “the economic policy of the United States is currently one of the substantial risks to the global economy.” And he warned that unpredictable trade and economic policy, biased rulings in U.S. courts and the dominant role of the Dollar were bad for Europe. He added that there was an increasing interest for Europe “to free oneself from a one-sided dominance.”

                                      In a Bloomberg interview, Trump rejected EU’s offer to scrap auto tariffs on cars if US does the same. He said “it’s not good enough” and added that “Their consumer habits are to buy their cars, not to buy our cars.” He also added that EU is “almost as bad as China, just smaller.”


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                                      German BDA, DIHK urged joint strong EU response to counter US steel tariffs

                                        More responses on US steel tariffs.

                                        German BDA employers group President Ingo Kramer said in a statement that “if the U.S. overrides international trade rules, then a strong, but above all, a joint strong EU response is required.”

                                        DIHK President Eric Schweitzer said “everyone will lose out” from the U.S. decision. It was important to keep up dialogue. But he also emphasized that “if needed, countermeasures should be taken to strengthen the EU position.”

                                        Germany’s steel industry association Wirtschaftsvereinigung Stahl criticized US  steel tariffs based on national security concerns is “grotesque”. And, “the U.S. measures are a protectionist intervention in international trade and run counter to the principles of the WTO”.

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                                        Italy Salvini: No longer be servant of silly EU rules

                                          In Italy, Deputy Prime Minister, leader or eurosceptic League, Matteo Salvini pledged that the country won’t change the 2019 budget despite rejection by the European Commission. He emphasized that “Italians come first” and “Italy no longer wants to be a servant to silly rules.” And he also explained that Italy has to “do the opposite” of previous government to boost growth and lower debt.

                                          European Economic Commissioner Pierre Moscovici said the EU and Italy are “still in a constructive dialogue even if it is within a clear framework… My door is always open and I hope that the Italian government will listen to this message.”

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