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Mid-US update: Yen selloff accelerates as S&P 500 hits record high

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    ActionForex.com
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    ** S&P 500 hits all time high already.

    Yen’s selloff accelerates in US session on the back on strong risk appetite. S&P 500, currently at 2871, up 0.49%, is closing in on record high at 2872.87. DOW is up 0.44% and NASDAP is up 0.83% at the time of writing. Dollar recovers some ground against Canadian Dollar, but remains pressured against all others.

    On the other hand, Sterling seems to have responded well to the post meeting press conference of Raab and Barnier. They’re adding intensity on Brexit negotiation and are still targeting to complete a deal by October EU summit. Kiwi follows as the second strongest, and then Euro.

    In other markets, FTSE closed down -0.34% at 7565.70. DAX gained 0.43% to 12385.49. CAC rose 0.54% to 5408.60. Gold is back below 1190 as Dollar stabilized a bit from Trump triggered selloff.

    UK Brexit Minister Raab still targeting to reach agreement with EU by October, Sterling hold on to gains

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      ActionForex.com
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      Sterling seems to be responding well enough to the post meeting press conference of UK Brexit Secretary Dominic Raab and EU chief Brexit negotiator Michel Barnier. The pound is holding on to gains against both Dollar and Yen.

      Raab said they had “positive” discussions and UK reaffirmed the commitment regarding Irish border. Raab said there are still “some significant issues to overcome”. Both agreed the need to “step up the intensity” during the final phase of the negotiations. Raab also emphasized that “if we have that ambition, that pragmatism and that energy on both sides, I’m confident we can reach that agreement by October.”  Regarding no-deal Brexit, Raab said “some of these hair-raising scare stories are far from true””

      Barnier said the negotiation has now entered the final stage. And both the EU and UK agreed to continually negotiation from now on. He added that the EU and UK can find common grounds, and both are now more advanced in defining the common ground, for foreign policy, security and economic relationship.

      Both sides will meet again in Brussels next week.

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      German FM Maas: Europe needs payment channels that are independent of US

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        ActionForex.com
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        German Foreign Minister Heiko Maas urged that an Europe has to set up payment channels that are independent of the US. That is crucial to save the Iran nuclear deal as US sanctions take effect.

        He said, “it is indispensable that we strengthen European autonomy by creating payment channels that are independent of the United States, a European Monetary Fund and an independent SWIFT system.”

        Regarding the Iran nuclear deal, Maas said “every day the deal is alive is better than the highly explosive crisis that would otherwise threaten the Middle East”.

        EU considering unscheduled summit in November to handle Brexit

          By
          ActionForex.com
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          UK Brexit Minister Dominic Raab is meeting with EU chief Brexit negotiator Michel Barnier in Brussels today. Reuters reported that the EU is definitely having a real push for concluding the negotiation by October 18-19 EU summit. But it’s not optimistic base on current progress. In particular, there is no concrete proposal, from EU’s point of view, that would work on the Irish border issue.

          The next scheduled summit on December 13-14 is seen as too late by EU. That would leave too little time for ratification of an agreement before formal Brexit in March 2019. Also, that’s too hard for businesses to start implementing contingency plans. Hence, an idea of a interim, unscheduled summit in November to handle the issue is floating around. It’s seen as the last moment for the negotiations.

          Into US session: Yen and Dollar Weak, Euro strong as German-Italian spread narrows

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            ActionForex.com
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            Entering into US session, Yen and Dollar remain the weakest ones in the currency markets. Selloff in the Dollar slows a little bit but there is no sign of bottoming yet. Swiss Franc is currently trading as the strongest one, followed by Euro. It seems Euro is rather troubled by Trump’s wide of the mark accusation that it’s manipulated. Though, it’s also helped by narrowing German-Italian yield spread. Chinese delegation will arrive in Washington today to resume trade talks with the US tomorrow. But expectation on that is rather low.

            Instead, Dollar could look into Jackson Hole symposium for some inspirations to regain strengthened We find two areas where “expansive money” Fed chair Jerome Powell’s comments might trigger volatility. That is, will there be early end of balance sheet reduction. And, will Fed return to pre-crisis channel system monetary policy? More in this report. Jackson Hole Symposium Preview: Two Questions on Fed’s Monetary Policy.

            In other markets, Gold rides on Dollar selloff to as high as 1196.37 so far today. But as selling slows, there is not enough momentum to put it through 1200 yet. European stocks are mixed today, with FTSE trading down -0.12% at the time of writing. But CAC is up 0.74% and DAX is up 0.63%. Italian 10 year yield drops -0.097 to 2.939. German 10 year bund yield rose 0.020 to 0.326. German-Italian yield spread is narrowing back, which is a positive sign. Asian markets were generally positive today. Nikkei ended up 0.09%, Hong Kong HSI rose 0.56%, China Shanghai SSE gained 1.31%, Singapore Strait Times dropped -0.15%.

            The economic calendar continues to be light today with Canada wholesale sales as the only feature in US session.

            UK launches ambitious strategy to boost exports from 30% to 35% of GDP

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              ActionForex.com
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              UK Department for International Trade launches an “ambitious” strategy to boosts exports to 35% of GDP. In a statement released today, it’s noted that the country exported GBP 620B in goods and services last year. That accounted for 30% of UK GDP. The department noted estimated that 400,000 businesses believe they could export by don’t. And from overseas is “only growing”.

              The key elements of the strategy are:

              • encourage and inspire more businesses to export
              • inform businesses by providing information, advice and practical assistance on exporting
              • connect UK businesses to overseas buyers, markets and each other
              • put finance at the heart of our offer

              International Trade Secretary is expected to tell business audience in a speech that “UK has the potential to be a 21st century exporting superpower”. And, “as we leave the EU, we must set our sights high and that is just what this Export Strategy will help us achieve.”

              The strategy draws strong support from the business sectors. CBI Diretor-General Carolyn Fairbain said in the statement that “The CBI strongly supports the ambition to make exports 35% of GDP, which will put the UK out in front of many of our international competitors.” And, “firms will work with the strong team in place at the Department for International Trade to ensure these plans are now rigorously carried out.”

              Director General of the British Chambers of Commerce Adam Marshall also said that “we welcome the government’s pledge in the new Export Strategy to work hand-in-hand with business to unlock opportunities for UK firms all across the globe.”

              Director General of the Institute of Directors Stephen Martin also said “we will be encouraging our members to engage with government to make sure this strategy really takes off and enables British firms to realize their full trading potential.”

              Full statement here.

              RBA minutes: El Niño risks increased, no strong case for a near term rate move

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                ActionForex.com
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                Minutes of August RBA meeting noted that drought conditions affected the timing of crop harvest. And the “probability of an El Niño event, which would typically be associated with low rainfall in eastern Australia, had increased over 2018″. That implies ” downside risks to the forecasts for farm output and exports.”

                Otherwise, the minutes came in basically as expected. They noted that global economic expansion continued but “direction of international trade policy in the United States continued to be a source of uncertainty for the global outlook.”

                Australian Dollar had “depreciated a little” against the US dollar. However, “in trade-weighted terms it had remained within its trading range of the previous two years.”

                Domestic forecasts were largely unchanged. GDP is projected to be a little above 3% over 2018 and 2019. Inflation would dip “temporarily” in September quarter due to some administered prices. But it’s expected to be at around 2.25% in 2020.

                On interest rates, the next move “would more likely be an increase than a decrease”. But there was “no strong case for a near-term adjustment”.

                Full minutes here.

                Former top treasury official blasts Trump as woefully wide of the mark on Yuan manipulation

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                  ActionForex.com
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                  Mark Sobel, a former top US Treasury Official criticized Trump’s remark regarding Chinese currency manipulation as “woefully wide of the mark”. And, Trump’s focus on bilateral balances as “silly”. And, to suspect a country of currency manipulation, there are criteria of “material ‘excessive’ current account surplus, an undervalued currency, and ample and rising reserves”.

                  In an article titled “Trump wide of mark on ‘manipulation‘”, Sobel point to facts that “China’s current account surplus is falling to under 1% of GDP. The renminbi, hit by capital outflows between early 2015 and the end of 2016, rose sharply against the dollar up to April 2018. The renminbi trade-weighted index rose too. Since then, the renminbi has fallen on both measures, but the depreciation reflects the dollar’s strength across the board. There is little evidence of more than scant Chinese foreign exchange market intervention.”

                  He noted “a currency manipulating country should have a significant current account surplus”. And, “the US Treasury in its foreign exchange reports uses a 3% of GDP threshold.” While a currency manipulating country might also have an “undervalued currency” one should “look at a country’s real effective exchange rate, not its bilateral dollar rate.” Additionally, the country may intervene heavily in the markets, “buying dollars to hold its currency down, resulting in an increase in its foreign reserve holdings.” But there might be “good reasons” to do so such as building up of reserves. There are many useful gauges of reserve adequacy to examine – reserves/GDP; reserves/short-term maturing debt; reserves/imports.

                  Sobel also completed that “a focus on bilateral balances is silly, even if the US Treasury is required to do so by statute and the president seems obsessed with them. Such an emphasis neglects to consider that certain countries specialize in certain goods and hold comparative advantage in such spheres.”

                  Mark Sobel is US Chairman of OMFIF. He is a former Deputy Assistant Secretary for International Monetary and Financial Policy at the US Treasury and until earlier this year US representative at the International Monetary Fund.

                  Trump didn’t anticipate much from this week’s US-China trade talk

                    By
                    ActionForex.com
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                    On trade dispute with China, Trump said he had “no time frame” for ending it. While the Chinese delegation is arriving the US soon, Trump said he did not “anticipate much” from the discussions.

                    He emphasized that the resolution will “take time” because “China’s done too well for too long, and they’ve become spoiled. They dealt with people that, frankly, didn’t know what they were doing, to allow us to get into this position.”

                    Dollar extends decline as Trump blames Fed Chair Powell for rate hikes

                      By
                      ActionForex.com
                      -

                      Dollar stays generally weak in Asian session and extends Monday’s selloff, on Trump’s attack on Fed. In a Reuters interview, Trump reiterated his comments last month that “I’m not thrilled with his raising of interest rates, no. I’m not thrilled,” referring to Fed Chair Jerome Powell.

                      He complained the the US is not getting any support from the Fed during his negotiation with other countries. Trump noted, “we’re negotiating very powerfully and strongly with other nations. We’re going to win. But during this period of time I should be given some help by the Fed. The other countries are accommodated.”

                      Trump also fingered pointed Eurozone and China for currency manipulation to give them an advantage over the US on trade. He said . “I think China’s manipulating their currency, absolutely. And I think the euro is being manipulated also.”

                      Mid-US udpate: Dollar lower as Trump criticizes Fed Powell, Gold to break 1190

                        By
                        ActionForex.com
                        -

                        A rather boring trading day is fired up after Bloomberg reported that Trump criticized Fed’s rate hike again. And this time, he specifically complained that Fed Chair Jerome Powell is not the “cheap money” Fed chair he expected. Dollar is currently trading as the third weakest for today, just next to New Zealand Dollar and Canadian Dollar.

                        And the greenback has finally got out of Friday’s range against Euro and Australian Dollar. GBP/USD extended the recovery earlier today already. On the other hand, Sterling is trading as the strongest one for today while Swiss Franc follows. But these two are rather close.

                        In other markets, FTSE closed up 0.43% at 7591.26, DAX gained 0.99% to 12331.30, CAC rose 0.65% to 5379.65. At the time of writing, DOW is up 0.40% or 100 pts, S&P 500 is up 0.25%. NASDAQ is down -0.06% (that is, nearly flat). It still a bit early to tell. But S&P 500 at 2857 is rather close to 2872.87 record high, which the index may challenge later in the week. 10 year yield extends recent decline and is down -0.04 at 2.833.

                        Gold is finally having some momentum for extending last week’s rebound from 1160.37 low. And, 1190 is within touching distance. Eyes, will be on 1200. Nonetheless, break of 1211.65 support turned resistance is needed to indicate short term bottoming. Or, outlook will remain bearish, in spite of the current rebound.

                        Trump lamented Fed chair Powell for rate hikes

                          By
                          ActionForex.com
                          -

                          Another factor that pressures the greenback is Trump again criticized the person he chose as Fed chair, Jerome Powell.

                          The occasion was a fund raiser at the Hamptons on Friday. Bloomberg reported that Trump said he expected Jerome Powell to be a “cheap-money” Fed chairman and lamented that his nominee instead raised interest rates.

                          Just a month ago, Trump already verbally intervened by saying in a CNBC interview that he was unhappy with Fed’s rate hikes. And that a strong dollar is disadvantageous to the US.

                          Anyway, if Trump did have that expectation and Powell turned out to be not what he expected, it’s obvious that Trump is blind. Powell has been consistent with who he is, till now,  since taking up the job as Fed Governor.

                          Also, there is a voting system in Fed. Being cheap-money or not, Powell only has one vote. Or, a dictator forgot this simple fact? Or is Trump just scapegoating a single person again?

                          Fed Bostic pledges not to vote for anything that knowingly inverts yield curve

                            By
                            ActionForex.com
                            -

                            Atlanta Fed President Raphael Bostic’s comments seem to be a factor that’s weighing down Dollar slightly in a slow market today.

                            Bostic said that Fed is doing well on inflation now, and the economy doesn’t need as much stimulus as it had before. Also, GDP is strong and unemployment is “very, very low” historically”. This part seems to be a bit hawkish.

                            However, Bostic also warned that yield curve is currently “extremely flat” and fed has concerns over the flatness. He went further to emphasize that he won’t vote for anything that knowingly inverts yield curve.

                            Into US session: Sterling higher in quiet trading, Kiwi weak

                              By
                              ActionForex.com
                              -

                              Entering into US session, Sterling catches a bid and is trading as the strongest one for today so far. Swiss Franc follows as the second strongest, then Dollar. On the other hand, New Zealand Dollar is the worst performing one, followed by Euro and than Australian Dollar. Though most of the pairs are bounded in Friday’s range, with the exception of GBP/USD and EUR/AUD only.

                              In other markets, European indices are generally higher today, with DAX leading the way up 0.96% at the time of writing. CAC is up 0.62% while FTSE is up 0.33%. 10 year German bund yield trades nearly flat today, up 0.005 at 0.311. Italian 10 year yield eased back, down -0.047 at 3.075.

                              In Asia, Nikkei closed down -0.32% while Singapore Strait Times lost -0.15%. But China Shanghai SSE rose 1.1% to 2698.47, can’t get hold of 2700. Hong Kong HSI rose 1.41%. 10 year JGB yield rose 0.0001 to 0.095.

                              The economic calendar is rather empty today. Main features are speeches of BoC Governing Council member Wilkins, Fed Bostic and Bundesbank head Weidmann.

                              Greece completes three year bailout program, begins a new chapter

                                By
                                ActionForex.com
                                -

                                European Commission formally announced the conclusion of the three-year stability support program for Greece and “a new chapter” begins. In the statement, EC hailed that “The successful conclusion of the programme is a testament to the efforts of the Greek people, the country’s commitment to reform, and the solidarity of its European partners.”

                                European Commission President Jean-Claude Juncker said: “The conclusion of the stability support programme marks an important moment for Greece and Europe. While their European partners have demonstrated their solidarity, the Greek people have responded to every challenge with a characteristic courage and determination. I have always fought for Greece to remain at the heart of Europe. As the Greek people begin a new chapter in their storied history, they will always find in me an ally, a partner and a friend.”

                                Pierre Moscovici, Commissioner for Economic and Financial Affairs, Taxation and Customs, said: “The conclusion of the stability support programme is good news for both Greece and the euro area. For Greece and its people, it marks the beginning of a new chapter after eight particularly difficult years. For the euro area, it draws a symbolic line under an existential crisis. The extensive reforms Greece has carried out have laid the ground for a sustainable recovery: this must be nurtured and maintained to enable the Greek people to reap the benefits of their efforts and sacrifices. Europe will continue to stand by Greece’s side.”

                                Full statement here.

                                Bundesbank: German growth on sound path, private consumption as linchpin

                                  By
                                  ActionForex.com
                                  -

                                  German Bundesbank noted in the latest monthly report that “economic boom in Germany was still ongoing”. In Q2, private consumption “continued its ascent” and was the “linchpin of economic growth”. Government consumption also rose “significantly”. Exports grew “moderately” following a drop at the start of the year.

                                  Bundesbank expected the economy to “remain on a sound growth path” in Q3 even though the pace could slow from H1. Industry is not expected to make any meaningful contribution to aggregate growth. On the other hand, private consumption remains a key growth driver due to “excellent labour market situation and the current strong wage hikes”

                                  For Eurozone, “the unabatedly positive sentiment among businesses and consumers suggests that the economic upturn in the euro area will continue”.

                                  Full release here.

                                  EU Moscovici: It’s not necessarily a Brexit deal between UK and EU

                                    By
                                    ActionForex.com
                                    -

                                    European Commissioner for Economic and Financial Affairs Pierre Moscovici talked about Brexit in a French radio interview today.

                                    Asked if there would definitely be a deal between the UK and the EU on Brexit, Moscovici said it’s “not necessarily”.

                                    He also added that “in theory” the Brexit vote can be reversed. He noted “it is up to the British themselves who have made the decision to leave, to decide ultimately if they will or not, and how they will do it.”

                                    But he also said that “the probability of Brexit is nevertheless very strong because there has been a vote of the people, a referendum…”

                                    Economists project 2 BoE hikes next year, we disagree

                                      By
                                      ActionForex.com
                                      -

                                      According to a Bloomberg survey, majority of the 31 economists surveyed expected BoE Bank Rate to reach 1.25% by the end of 2019. That is, they expected two 25bps rate hikes next year. The first move is expected to come in Q2. It’s cited that Brexit is a concern that slows BoE’s tightening path. But by the time of Q2 next year, such concerned should be cleared. Meanwhile, falling inflation could only give BoE a reason to keep rates on hold until May. With Brexit cleared, and unfolded smoothly, path will be clear for another hike in November. Some analysts also saw BoE’s unanimous votes as sign that policymakers are confident enough to act twice next year. The Bank Rate currently stands at 0.75%.

                                      But it should noted that BoE has revised down the rate path in August Inflation Report released less than three weeks ago. The central bank forecast Bank Rate to hit 0.9% in Q3 2019, revised down from 1.0%. Bank Rate is forecast to be at 1.0% in Q3 2020, revised down from 1.2%.

                                      Looking into the details, the conditioning path that BoE used didn’t price in a 25bps hike fully until 2020. And basically there would be no more hike within the forecast horizon. And based on such conditioning path, CPI is forecast to slow to 2.2% in Q3 2019, 2.1% in 2020. July’s pick up in CPI to 2.5% was in line with BoE’s expectations.

                                      So, to us, a hike in H2 of 2019 is possible based on the current projections and developments. But a hike in Q2 2019 looks a bit stretched. And two hikes in 2019 is rather far-fetched.

                                      Moreover, the unanimous vote was seen to us as a compromise between hawks and doves. That is, BoE was going to hike once this year anyway as Q1 slowdown was proven to be temporary. Let’s do it and settle, but to stay graudual and cautious going forward.

                                      UK to publish technical notices on no-deal Brexit preparations

                                        By
                                        ActionForex.com
                                        -

                                        UK Brexit Minister Dominic Raab will meet EU chief Brexit negotiator Michel Barnier in Brussels on Tuesday. Prime Minister Theresa May’s spokesman said that “on the agenda will be resolving the few remaining withdrawal issues related to the UK leaving the EU and pressing ahead with discussions on the future relationship.”

                                        Raab said that securing a Brexit deal was still “the most likely outcome”. But at the same time, the government scheduled to push a series of technical notices for no-deal preparation. Raab added that the government would wanted to “clearly set out the steps that people, businesses and public services need to take in the unlikely event that we don’t reach an agreement” with the EU.

                                        The no-deal advice will be due on Thursday and are “sensible, proportionate, and part of a common sense approach to ensure stability, whatever the outcome of talks”, according to Raab.

                                        German Finance Ministry: Turkish crisis adds to risks of Brexit and trade war

                                          By
                                          ActionForex.com
                                          -

                                          In its monthly report, the German Finance Ministry the “economic developments in Turkey present a new, external economic risk” to the economy. Germany is the second largest foreign investor in Turkey.

                                          That adds on trop of Brexit as “risks remain particularly with regards to uncertainty over how Brexit is going to pan out”.

                                          US trade policy is another main risk as “the persistent debate about tariffs and the threat of a trade war are choking trade activity.”

                                          Nonetheless, despite the risks, the Minstry said the economy remains supported by state spending, private consumption, low interest rates, a robust labor market and rising real wages.

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