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Fed Clarida: US expansion could become longest in in history in 2019

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    ActionForex.com
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    Fed Vice Chair Richard Clarida said in a speech that the US economic fundamentals are “robust”. And if the economic expansion continues in 2019 as he expected, “this will become the longest US expansion in recorded history”.

    And, at this stage of the interest rate cycle, it will be “especially important to monitor a wide range of data” for the path of Fed’s policy interest rates. “Data dependence” should play in two distinct roles of “formulation and commination” of monetary policy.

    He also noted that “as the economy has moved to a neighborhood consistent with the Fed’s dual-mandate objectives, risks have become more symmetric and less skewed to the downside”.

    His full speech here.

    EU to push reform of three WTO functions in upcoming G20 summit

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      ActionForex.com
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      Defending multilateral rules-based international order would be a focus of EU in the upcoming G20 summit in Argentina later this week. European Commission President Jean-Claude Juncker and European Council President Donald Tusk outlined the key issues in a joint letter today, including global confidence, fair globalisation and trade, climate change, Africa-Europe Alliance etc.

      On trade, they warned that “the rules-based multilateral trading system is facing a deep crisis” and the “entire system” is at risk. They also criticized that “the longstanding G20 commitments to keep markets open, to fight protectionism and support the multilateral trading system, risk becoming empty words.”

      EU will promote “a positive trade agenda, including the reform of the three functions of the World Trade Organisation (negotiating, monitoring and dispute settlement functions”. And it urged that “G20’s support can be instrumental in providing political impetus to the trade discussions in Geneva”.

      EU’s “Facts and figures about the European Union and the G20” booklet here.

      European Update: Dollar gaining momentum on Trump’s tariff threats

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        ActionForex.com
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        Dollar seems to be responding rather well to Trump’s threat to escalation tariff war with China. And, it’s gaining momentum in European session. Nevertheless, reactions in other markets are rather muted. There were some jitters as it’s falsely reported that Trump and Xi agreed a deal but was quickly denied. For now, Australian and New Zealand Dollar are still the strongest ones for today. But both look vulnerable and their places could be taken by Dollar and Yen easily.

        Sterling and Euro are the worst performing ones so far. There were rumors that Italy’s 2019 budget target target could finally settle at 2.2% of GDP instead of 2.4%. UK Prime Minister Theresa May issued a TV debate challenge to Labour’s Jeremy Corbyn on Brexit. And Corbyn swiftly accepted. The debate could be held on December 9, just two days ahead of Commons vote on the deal. Eventually, other parties’ representatives may also join. These news provided little support to both currencies.

        Technically, GBP/USD’s break of 1.2764 supports suggests decline resumption and focus will be quickly back on 1.2661 low. USD/CHF is now eying 1.0006 minor resistance and break would put 1.0128 resistance back into focus. We’ll see Dollar could sustain its momentum. Or it will be knocked down by Fed Vice Chair Richard Clarida’s comment at 1330 GMT.

        In European markets, at the time of writing:

        • FTSE is down -0.31%
        • DAX is down -0.15%
        • CAC is down -0.19%
        • German 10-year yield is down -0.0125 at 0.35.
        • Italian 10-year yield is up 0.0035 at 3.266. German-Italian spread stays below 300

        Earlier in Asia:

        • Nikkei gained 0.64%
        • Hong Kong HSI dropped -0.17%
        • China Shanghai SSE dropped -0.04%
        • Singapore Strait Times dropped -0.10%

        UK Lidington: Brexit deal is a binary choice for the Commons

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          ActionForex.com
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          UK Cabinet Office Minister David Lidington, Prime Minister Theresa May’s de facto deputy, warned today that “There’s no plan B because the European Union itself is saying the deal that is on the table is the one that we have had to compromise over.”

          He added “there is a bit of wishful thinking on the part of some people that a preference expressed by politicians in the UK will somehow lead to a different plan, an alternative being offered.”

          And, “There is a binary choice for the House of Commons to make: they can accept the deal that is on table, that is a compromise but I think is a good compromise for our national interest, or they can vote it down. The EU 27 is very clear they are not going to reopen this package.”

          Lidington also admitted that “If the vote were today, it would be a difficult one to win, but I think that we have time between now and (Dec. 11) to make the case.”

          Trump highly unlikely to hold off 25% tariffs on $200B Chinese goods, threaten another $267B

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            ActionForex.com
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            In an interview with the WSJ, Trump said it was “highly unlikely” for him to hold off on raising tariffs on USD 200B in Chinese goods from 10% to 25% on January. We went further to threaten China for more tariffs if they cannot make a deal.

            Trump said, “the only deal would be China has to open up their country to competition from the United States”. And, “as far as other countries are concerned, that’s up to them.”

            Then Trump warned “If we don’t make a deal, then I’m going to put the $267 billion additional on”.

            UK corrected Trump’s false claim on Brexit deal

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              ActionForex.com
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              Without knowing the details, Trump questioned if the Brexit deal with EU with hamper trade with the US. But UK PM May’s office quickly clarified and corrected Trump’s claim.

              Trump said to reporters outside the White House that “I think we have to take a look seriously whether or not the UK is allowed to trade.” And, he added, “because right now if you look at the deal, they may not be able to trade with us.”

              May’s office then said “the political declaration we have agreed with the EU is very clear we will have an independent trade policy so that the UK can sign trade deals with countries around the world — including with the US.” And, “we have already been laying the groundwork for an ambitious agreement with the US through our joint working groups, which have met five times so far.”

              UK PM May to visit Northern Ireland to sell her Brexit deal

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                ActionForex.com
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                The UK Parliament is set to vote on the Brexit withdrawal agreement on December 11. Prime Minister Theresa May will start her nationwide tour today to secure the vote. Northern Ireland and Wales are her destinations today.

                For Norther Ireland, May said in a statement on her visit that “having been told by the EU that we would need to split the UK in two, we are leaving as one United Kingdom.” And, “my deal delivers for every corner of the UK and I will work hard to strengthen the bonds that unite us as we look ahead to our future outside of the EU.”

                May is also expected to highlight the benefits of her deal for businesses and said it has support from manufacturers who “need to be able to trade freely across the border with Ireland and have unfettered access to the rest of the United Kingdom’s market”.

                Italy to stick with 2019 budget for now, wait for technical analysis of the plan

                  By
                  ActionForex.com
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                  Italy decided to stick with their 2019 budget after meeting between Prime Minister Giuseppe Conte and his two deputies, Matteo Salvini and Luigi Di Maio. In a joint statement, the three said that “the objectives that have already been fixed are confirmed.” Also, “as far as the on-going discussions with European institutions are concerned, we agreed to wait for the technical analysis of the proposed reforms which have the most important social impact to quantify precisely the cost.”

                  Full statement of the coalition government here.

                  Meanwhile, it’s reported that they’re still flexible in adjusting the details of the plan so as to avoid disciplinary actions by the European Commission. For example, the so called citizen’s income plan could be delayed for a month or two which could save billions.

                  WTO indicator dropped to lowest since Oct 2016, exports orders weakest since 2012

                    By
                    ActionForex.com
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                    WTO’s World Trade Outlook indicator dropped notably from 100.3 to 98.6 according to data released today. That’s the lowest level since October 2016, with declines in all component indices. WTO said in the release that it signals trade growth in the coming months is “expected to be below-trend”.

                    WTO said that “the continued moderation in the overall WTOI index was driven by the steady decline in the export orders index (96.6), which remains below trend and is approaching the weakest point recorded in 2012 during the eurozone crisis”. And, “The latest results are consistent with the WTO’s downgraded outlook for global trade issued in September amid escalating trade tensions and tighter credit conditions in important markets. The revised forecast anticipated trade expansion to slow to 3.9% in 2018 and 3.7% in 2019 from 4.7% in 2017.”

                    Full release.

                    ECB Draghi: Prevailing uncertainties call for patience, prudence and persistence calibrating policy

                      By
                      ActionForex.com
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                      ECB President Mario Draghi told the ECON committee of the European Parliament today that data since September have been “weaker than expected”. And, the “loss in growth momentum mainly reflects weaker trade growth, but also some country and sector-specific factors.”

                      But he tried to talk down the slowdown as he said “A gradual slowdown is normal as expansions mature and growth converges towards its long-run potential.” Also, “some of the slowdown may also be temporary.” He maintained that “underlying drivers of domestic demand remain in place.” On prices, Draghi reiterated that “recent developments confirm the Governing Council’s earlier assessments of the medium-term inflation outlook.”

                      And ECB therefore “continues to anticipate that, subject to incoming data confirming our medium-term inflation outlook, net asset purchases will come to an end in December 2018.” But he also emphasized that “prevailing uncertainties still call for patience, prudence and persistence in calibrating our monetary policy stance.” And, “significant degree of monetary policy stimulus will be maintained, even after the end of net asset purchases.”

                      His full speech here.

                      Into US session: Italy and Brexit lift sentimens, Dollar, Yen and Swiss Lower

                        By
                        ActionForex.com
                        -

                        Entering into US session, return of risk appetite helps lift Australian and New Zealand Dollar today. Sterling and Euro are also firmer but we’re not seeing any follow through buying the these four currencies yet. It takes some more time to confirm their underlying momentum. The Pound is partly supported by EU’s formal endorsement of the Brexit withdrawal agreement. Euro and European stocks rise on news that Italy is finally being flexible to adjust its budget plan. The slightly weaker than expected German Ifo reading was ignored. On the other hand, Yen, Dollar and Swiss Franc are the weakest ones.

                        In European markets, at the time of writing:

                        • FTSE is up 0.79%
                        • DAX is up 1.24%
                        • CAC is up 0.91%
                        • German 10 year yield is up 0.0152 at 0.359
                        • Italian 10 year yield drops sharply by -0.1672 to 3.247
                        • German-Italian spread is now at 288, back below 300 alarming level

                        Earlier in Asia

                        • Nikkei rose 0.76% to 21812.00
                        • Hong Kong HSI rose 1.73% to 26376.18
                        • Singapore Strait Times rose 1.34% to 3093.38
                        • However, China Shanghai SSE dropped -0.14% to 2575.81. This is a risk to the global markets

                        EU publishes joint proposals with other members on WTO reforms

                          By
                          ActionForex.com
                          -

                          EU published the proposal of reform of the WTO’s Appellate Body today, for presentation on the General Council meeting on December 12. The proposal is a joint effort with other WTO members including Australia, Canada, China, Iceland, India, Korea, Mexico, New Zealand, Norway, Singapore and Switzerland.

                          EU Trade Commissioner Cecilia Malmström said in the press release that  “the appellate body function of the WTO dispute settlement system is moving towards a cliff’s edge. Without this core function of the WTO, the world would lose a system that has ensured stability in global trade for decades. Now, together with a broad coalition of WTO members, we are presenting our most concrete proposals yet for WTO reform. I hope that this will contribute to breaking the current deadlock, and that all WTO members will take responsibility equally, engaging in good faith in the reform process.”

                          Full press release and the proposal.

                          ECB Praet: Headwinds becoming increasingly noticeable

                            By
                            ActionForex.com
                            -

                            ECB chief economist Peter Praet said in a speech today that “factors related to protectionism, financial market volatility and vulnerabilities in emerging markets are creating headwinds that are becoming increasingly noticeable”.

                            He added that “surveys of euro area business activity and sentiment indicators have softened perceptibly relative to their earlier highs, although they remain in expansionary territory and are still above long-term averages for most sectors and countries.”

                            Here is his full speech. It’s actually identical to the one delivered on November 13.

                            German Ifo dropped to 102, points to 0.3% Q4 GDP growth at most

                              By
                              ActionForex.com
                              -

                              German Ifo business climate dropped to 102.0 in November, down from 102.9 and missed expectation of 102.3. Current assessment gauge dropped to 105.4, down from 106.1 and missed expectation of 105.6. Expectations gauge dropped to 98.7, down from 99.7, missed consensus of 99.3.

                              Ifo President Clemens Fuest noted in the release that “Together with other indicators, these results point to 0.3 percent economic growth in the fourth quarter at most. The German economy is cooling down. ”

                              Full release here.

                              Italy Di Maio tones down on defict, citizens are more important than numbers

                                By
                                ActionForex.com
                                -

                                More on comments from Italy’s Deputy Prime Minister Luigi Di Maio as he toned down the stance on budget. He said in a radio interview that “what is important is that the budget contains the goals that we have established.” He referred to the measures including citizen’s income, and increase in retirement age.

                                And, he added “then if the negotiation means that the deficit (target) must come down a bit, for us it’s not important.” Di Maio emphasized that “citizens are more important than numbers.”

                                BoJ Kuroda: It’s possible to shrink the balance while keeping markets stable

                                  By
                                  ActionForex.com
                                  -

                                  BoJ Governor Haruhiko Kuroda appeared in the Parliament again today. He clarified that the objective of the quantitative and qualitative easing problem was to lift inflation to 2% target, rather than bankrolling the government debt.

                                  He also pointed out “how to deal with the BOJ’s expanded balance sheet would be among key challenges for us when we were to exit from quantitative easing.”

                                  However, “past experience of other central banks indicate that with a good mix (of redemption and re-investment of bonds), it’s possible to shrink our balance sheet at an appropriate pace, while keeping markets stable.”

                                  Italy might lower 2019 deficit target, Euro lifted, German-Italian spread drops below 300

                                    By
                                    ActionForex.com
                                    -

                                    Euro is given a lift on reports that the Italian coalition is considering adjustment on its 2019 budget plan. Il Messaggero newspaper quoted Armando Siri, a Transport Ministry undersecretary saying that “In order to save the budget and avoid an increase in market turbulence … a small fine-tuning (of the deficit target) could be considered.”

                                    Separately, it’s reported that Deputy Prime Minister, leader of Five-Star Movement, Luigi Di Maio also said deficit target reduction is not a problem as long as budget measures remain the same. On Sunday, another Deputy Prime Minister, leader of the League, Matteo Salvini also said “no one is stuck” to the deficit target, hinting at some flexibility for adjustment.

                                    The cabinet is expected to meet today in the evening to discuss reduction of the 2.4% deficit target of 2019. And that could open up the door for constructive dialogue with the European Commission to avoid Excessive Deficit Procedure.

                                    Italian 10 year yield dips notably today and is down -0.191 at 3.223. German 10 year yield is currently up 0.028 at 0.372. That is, spread is now below 300 alarming level.

                                    UK PM May: Take the Brexit deal or go back to square one with more division and uncertainty

                                      By
                                      ActionForex.com
                                      -

                                      UK Prime Minister Theresa May is expected to warn lawmakers today that they either take her agreed Brexit deal with the EU, or crush out with no deal at all. According to the excerpts of her statement to the parliament today, May would say “this has been a long and complex negotiation. It has required give and take on both sides. That is the nature of a negotiation”.

                                      And she will add “I can say to the House with absolute certainty that there is not a better deal available”. May would call the Commons to back the deal that allows UK to “move on”. Or, “this House can choose to reject this deal and go back to square one … It would open the door to more division and more uncertainty, with all the risks that will entail.”

                                      Japan PMI manufacturing dropped to 51.8, underlying trend skewed to the downside

                                        By
                                        ActionForex.com
                                        -

                                        Japan PMI manufacturing dropped to 51.8 in November, down from 52.9 and missed expectation of 53.0. That’s also a two-year low.

                                        Commenting on the Japanese Manufacturing PMI survey data, Joe Hayes, Economist at IHS Markit, which compiles the survey, said:

                                        “October’s six-month peak seems to have been just a transitory month-to-month rebound following September’s weather-hit dip. The November PMI dropped to a two-year low as the rate of output growth weakened and new orders for goods declined for the first time since September 2016.

                                        “The underlying trend appears to be skewed to the downside. Indeed, the fall in new orders is a worrying development as easing global growth momentum coupled with a weak domestic backdrop could spell further demand woes for Q4. In fact, survey data suggests that manufacturers have already begun to pare back expectations, as confidence fell for a sixth consecutive month.”

                                        Full release here.

                                        EU endorsed Brexit deal, Juncker urges UK Commons to ratify

                                          By
                                          ActionForex.com
                                          -

                                          EU27 leaders swiftly approve the Brexit deal after just taking less than an hour in the special EU summit in Brussels today. They endorsed both the Brexit withdrawal agreement, and the political declaration on future EU-UK relations. The European Council’s full statement here.

                                          European Council President Donald Tusk said in the press conference that “Ahead of us is the difficult process of ratification as well as further negotiations. But regardless of how it will all end, one thing is certain: we will remain friends until the end of days, and one day longer.”

                                          European Commission President Jean-Claude Juncker said, “Sad day, no cause for celebrations. I salute unity of EU27 during the negotiations. We stood by Spain on Gibraltar, they have our solidarity. I’m proud of the work of our negotiating team. This is the only deal possible.”

                                          And, “This is the best deal possible. I invite those who have to ratify it in the U.K. House of Commons, to do so. This is the best deal for Britain. This is the best deal for Europe. It is the only deal possible.”

                                          Post meeting press conference.

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                                          Full set of information of the special EU summit.

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