Sterling doing rather well today with GBP/CHF, GBP/NZD and GBP/AUD topping the daily top mover table. These three pairs are also the top 10 movers in the 4 hour and monthly period.
Upside momentum in GBP/CHF is quite clear as seen in 6H action bias chart.
Some comments from ECB officials.
Klaas Knot, ECB Governing Council member and President of the Dutch central bank, said “Inflation has been fairly stable so that provides me with a high degree confidence that actually inflation will pick up and will at some point approach the definition of price stability.”
Francois Villeroy de Galhau, ECB Governing Council member and Bank of France Governor, said “we are making progress on the inflation front… although a bit slower than we had expected.” And, “our policy is on a path to normalization.”
ECB Governing Council member and Bundesbank President Jens Weidmann said in a German newspaper interview that “I personally think that the good economic developments and the inflation forecast would allow a rapid end to the bond purchases.
It’s reported, with unnamed sources quoted, that EU officials called an urgent meeting regrading Brexit. It’s believed that there could be certain decisions made regarding the transition deal ahead of the EU summit later this week. Meanwhile, UK Brexit Secretary David Davis will also meet with EU chief negotiator Michel Barnier.
BoJ’s government debt holdings jumped to record high in the period of October to December 2017. By the end of December, holdings jumped 6.8% yoy to JPY 449T. That equaled to 41.1% of all Japanese government debt. Insurance and pensions holdings was a distant second, at JPY 21.6T only. Overseas holdings also rose to JPY 122T, a record high.
45 trade groups wrote an open letter to Trump trying to stop him from starting a trade war with China. In a joint open letter: –
The group urged Trump’s administration to take “measured, commercially meaningful actions consistent with international obligations” and warned Trump not to “penalize the American consumer and jeopardize recent gains in American competitiveness.” It’s clear to the group of businesses what Trump is trying to do regarding tariff on China is not commercially meaningful.
The group also warned of the “chain reaction of negative consequences” of trade war with China by “provoking” retaliation. And Trump should not respond to unfair Chinese practices and policies by measures that will “harm U.S. companies, workers, farmers, ranchers, consumers, and investors.”
In particular, it’s listed out in the letter that
Additionally, the group warned that “imposition of unilateral tariffs by the Administration would only serve to split the United States from its allies”.
And below is the list of trade groups:
EU published a list of products for retaliation over US steel and trade tariffs last Friday. The total value of US imports to EU could add up to EUR 6.4b in total. There are two parts in the list. Part A includes goods that are worth EUR 2.8b and EU aim to impose 25% tariff. Part B include products that could be tariffed after three years. It’s believed that EU will notify the WTO as soon as possible within a 90-day deadline. For the time being, according to WTO rules, EU can only retaliate up to the amount of EU’s steel exports to the US, and thus that EUR 2.8b amount. But EU is making itself ready for further action, playing by the WTO book.
Here is the list of products in case you’re interested.
German Economy Minister Peter Altmaier will meet with US Commerce Secretary Wilbur Ross this week, and “anyone in Washington who is willing to talk.” US steel and aluminum tariffs is the main focus on the trip for Altmaier. He warned that “what’s dangerous about the current situation is that it threatens a spiral of one-sided measures that contradict the idea of free trade.” And, “that would counter what we’ve done for the past 60 years. Altmaier also emphasized that “Americans are still our allies” and he’d want to prevent a trade war.
German Finance Minister Olaf Scholz will meet US Treasurer Steven Mnuchin at G20 finance head meeting in Buenos Aires. Scholz told the press that “we must think about how we can ensure growth for the future and of course also how we can keep one of the most important resources for future wealth — the possibility to trade freely — stable.” And, that’s why it would be difficult if protectionism played a bigger role now again.”
Bundesbank President Jens Weidmann said in a German newspaper interview:-
Weidmann is always felt like the lone hawk in ECB board. Recent comments from other ECB officials generally remained cautious.
For example, ECB President Mario Draghi just repeated last week that he still need to see further evidence of prices picking up towards target. And repeated that “monetary policy will remain patient, persistent and prudent.” Chief economist Peter Praet said last week that he didn’t even prefer to revise the ECB’s forward guidance too early.
BoJ summary of opinions at March 8-9 policy meeting showed no change in the board’s stance on monetary policy. Generally speaking “powerful monetary easing” will be maintained as it’s “still a long way” to meet 2% inflation target. There were concerns of Yen’s appreciation and stocks’ decline as they would “constrain wages and prices” and risk delaying of meeting price target. the board also saw the need to explain the difference between “normalization” and “tightening” even though it’s not in the phase to consider normalization. So we’ll likely hear more rhetorics from BoJ Governor Haruhiko Kuroda ahead regarding exit. Yet he’ll repeat and repeat that it’s not there for exit yet.
Some quote highlights:-
DOW opens mildly higher today. It’s staying in converging triangle pattern. And should be approaching a breakout point. Levels to watch are 24668.83 and 25449.15.
US session data wrap up:-
German Chancellor Angela Merkel criticized that US President Donald Trump’s steel and aluminum tariffs are against the principles of the WTO. And “we want to change or solve these problems via discussions if possible.”
At the same occasion, Swiedish Prims Minsiter Stefan Lofven said the tariffs are worrying and regrettable.
Yen staying strongest entering into US session. Commodity currencies are under pressure.
CAD/JPY in down trend across time frame. With increasing intraday downside bias.
An unnamed EU official quoted saying that there will be a transition Brexit deal next week. But that would be provisional. He’s quoted:
It’s reported earlier that UK Brexit Secretary David Davis is targeting to complete the legal text of the transition deal at the two-day summit from March 22.
However, it’s unlikely for a resolution on soft Irish border to be reached.
Intensive talk is now planned between March 26 and April 18 on the issue.
So, yes, the best transition deal will be provisional.
Some highlights on BoE’s FPC statement from the March 12 meeting:-
ECB chief economist Peter Praet sounds cautious as usual. In the latest ECB meeting, the central bank took away the option to expand the asset purchase program again. But going further, Praet said “I would not revise the guidance too early, because that could send wrong signals about the end of our net asset purchases.” And, “I wouldn’t say there is a date or a deadline” for the program.
He also added that “it is clear that if you believe that the degree of slack is higher, then the process of convergence to below, but close to, 2 percent over the medium term would be drawn out. ” And, “other things being equal, it would (mean a) shallower (inflation path)”.
Referring to ECB’s pledge to keep interest at current level “well past” end of asset purchase, Praet said “markets quantify the ‘well past’ interval as ‘up to next spring’.” And he emphasized that “once you stop net asset purchases the signaling aspect of the asset purchase program disappears and you therefore have to be much more precise about the future path of the short term rates.”
Fitch rating agency predicts RBA to raise cash rate by 25bps this year. It also predicts another 50bps hike next year in 2019.
What Fitch observed is that RBA appears comfortable lagging behind other central banks in tightening policy, allowing exchange rate flexibility to serve as a buffer”. This is in-line with what RBA Governor Stephen Lowe has repeated a couple of times. That is, RBA didn’t cut as deep as other global central banks. And therefore, it also doesn’t need to reverse that cycle as others like Fed and BoC.
But Fitch expects Australia economy to gain further momentum this year with growth holding steady at 2.7% in 2019. That’s thanks to “strong terms of trade on income, broadly accommodative financial conditions and buoyant prospects for investment”.
IMF Managing Director Christine Lagarde on trade war:-
The IMF’s Global Prospects and Policy Challenges report:-
U.S. Chamber of Commerce President and CEO Thomas Donohue criticized that unilateral tarrifs on Chinese goods by Trump’s government would be destructive to the economy. He warned that the USD 30b a year tariffs on Chinese good would w”ipe out over a third of the savings American families received from the doubling of the standard deduction in tax reform.” Further, with Trump’s request of USD 60b a year tariff, “the impact would be even more devastating.”In addition, Donohue said “tariffs could lead to a destructive trade war with serious consequences for U.S. economic growth and job creation,”
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Sterling soars as Brexit transition deal “done”. GBP/USD and EUR/GBP updates
Sterling jumps sharply on news that Brexit transition deal is agreed. And, it’s only awaiting sign-off by UK Brexit Secretary David Davis and EU Chief Negotiator Michel Barnier. David and Barnier are meeting in Brussels to hammer out the details today. The legal text of the agreement is expected to be delivered to the EU summit on Thursday and Friday for final approval. Davis and Barnier will hold a joint press conference later today.
It’s reported elsewhere that the cut off date for the transition period will be December 2020. And, UK will be allowed to make 3rd party trade deals during the transition.
GBP/USD takes out 1.3995 to resume the rally from 1.3711. It’s on course for a test on 1.4144. And, it’s getting more convincing that the correction from 1.4345 is completed. And the pair is ready for resuming larger up trend from 2016 low at 1.1946.