In the local markets
USDCNY fixed at 6.8769 today, -295 pips from last fixing and -124 pips from the previous closing at 6.8893 on 16:30 Beijing time. In line with estimates
Local currency markets will likely follow the Yuan today so not looking for much excitement across Asia EM FX
Local equity markets are trading well catching an updraft via US equity futures as in the absence of any inflammatory rhetoric from the US administration, the perception that trade tensions are easing continues to steer the ship. But investors are also breathing a sigh of relief that UK worst-case scenarios didn’t unfold overnight.
Asia traders are pivoting to China’s Central Economic Work Conference which is one of the most important political and economic events on the calendar (Dec 19-21)
A more favourable repricing of China risk is underway heading into the event given the theme of the meeting is “Stabilizing the currency, easing credits, and loosening fiscal policies,” according to various media sources. Indeed, music to regional investor’s ears after all that equity market investor doesn’t enjoy buying stocks when interest rates are falling m fiscal constraints are easing all within the backdrop of a stable currency.
New year projected GDP is expected to be announced in line with market expectations at 6.5 % while the government will likely announce more creative policies to support SME as local banks have been reluctant lenders in that space.
And all of this will be within the context of China de-escalating trade tensions with the US around discussion of Made in China 2025 initiative.
G-10 has been quiet and predictably so ahead of the ECB.
Most of the desk conversations are centring on Brexit. One of the exciting discussion brought by my colleagues this morning is falling on the Reese-Mogg interview post the no-confidence vote, and presumably, the other dissenters would vote for Mays deal if there were no backstop. This is the DUPs viewpoint too. However, if May comes back from her whistle-stop tour with some legally binding guarantee that the backstop would not be permanent, that might also work. Given the likelihood that May’s Brexit deal won’t pass Parliament suggestion next step is a no-confidence vote. Indeed, no one wants an election, and May needs the DUP on board, and they need to then themselves vote for the only Brexit they can guarantee.
Ultimately May and the EU coming up with a viable solution to solve the problem of backstop so that it is not indefinite. I.e. the UK will have a unilateral opt-out provided that technological solutions are in place so that the transition is ceaseless. It doesn’t put a date on end, but still, it gives the UK ultimate control. It meets Boris Johnson’s vision of Brexit, the DUP and some of the other brexiteers like Reese-Mogg.
