Archives of “September 2019” month

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ICYMI: Mnuchin says yuan will be in focus in next round of China talks

  
  Analysis
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An overnight report on comments from US Treasury Secretary Mnuchin

  • “I expect the governor of the People’s Bank of China to come over for these talks,” Mnuchin told reporters Monday. “So part of the conversations we will be having with them is around currency and currency manipulation.”
Via Politico (more at the link, but the quote above is the gist of it)
An overnight report on comments from US Treasury Secretary Mnuchin

Fitch slash growth rate forecasts for China, US, , and Eurozone

  
  Analysis

Fitch ratings with their analysis

  • protectionism choking global growth prospects
  • China’s growth rate is now expected to fall to 6.1% in 2019 and 5.7% in 2020, down from 6.2% and 6.0%, respectively
  • primary cause of deteriorating outlook in China for next 12-18 months is trade policy
  • Eurozone growth is now forecast at 1.1% in both 2019 and 2020 compared to 1.2% for 2019 and 1.3% for 2020 in June
  • Update of global economic outlook forecasts, it has made significant downward revisions to China, Eurozone GDP growth forecasts over next 18 months
  • US growth forecasts have been lowered to 2.3% in 2019 and 1.7% in 2020 compared to 2.4% and 1.8% respectively, in June
  • Eurozone growth prospects are at risk from real possibility of a ‘no-deal’ Brexit, a scenario that could spark a significant UK recession in 2020
  • Intensification of downside global risks since fed cut interest rates in July now looks likely to prompt another 25bp cut in December 2019
  • ecbb European Central Bank likely to announce significant fresh accommodation measures very soon, which will include a restart of asset purchases in October

The question is not if but how much will the ECB deliver this week – Danske Bank

  
  Analysis
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The firm outlines its expectations ahead of the ECB meeting this week

ECB

Analysts at the firm say that “the question is not if the ECB will announce new initiatives but how much it will deliver” instead. I think that’s an argument that everyone already has figured out by now. So, let’s see what they are expecting:

“We expect the ECB to announce (1) a 20bp cut in the deposit rate (other key rates unchanged) and that the extended forward guidance (‘at present or lower…well past the horizon of net asset purchases’) will remain; (2) a 12-month QE restart of €45-60bn per month, albeit also acknowledging the downside risks given the recent hawkish communications from a few Governing Council members; and (3) a tiering system.”

At this stage, a cut to the ECB deposit facility rate, a tiering system and a change in forward guidance message is all but guaranteed. The big question is whether or not we will see the reintroduction of QE this week.

(more…)

Tariffs threat to see euro fall to 1.07 against the dollar in three months – ING

  
Analysis, Forex

ING lowers their forecasts for the euro

ING

The firm argues that the euro will weaken to levels last seen in 2017 against the dollar due to threats stemming from US trade policy. Noting that:

“Further deterioration in the US-China trade war will drive the euro lower. But there is also a non-negligible risk of the US imposing, or at least threatening to impose auto tariffs on Eurozone exports. An overhang of such tariffs should weigh on the euro.”

Expanding further, the firm also views that the market already has “very aggressive” expectations of the Fed easing and that makes it hard for the US central bank to surprise and precipitate dollar weakness against the euro.
Adding that the dollar still enjoys high carry and that makes its positioning for a decline – in terms of yields – as “unattractive”.
Also, they no longer see EUR/USD as being undervalued so that won’t provide a supportive factor to the pair and notes that short positions are not stretched:

“This means that EUR shorts can still be built and positioning does not act as a limiting factor behind the EUR/USD fall.”

Fed rate cut this month still on track after Friday’s NFP

  
  Analysis
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Friday’s August jobs report data is here:

  • August non-farm payrolls +130K vs +160K expected
A response to the result via Credit Agricole, in brief:
  • still-growing labour market and “average hourly earnings was stronger than expected, good news for wage inflation”
Data doesn’t change the outlook for the Fed, CA expect a 25bp cut in Sep then again sometime in Q4

Here is UK PM Johnson’s cunning plan to stop Brexit extension beyond October 31

  
  Analysis
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Earlier post on the UK media report on Prime Minister Boris Johnson plan to sabotage Brexit extension

  • UK press reports on UK PM’s plan to sabotage any Brexit extension
The background to this is Parliament have voted to require the PM to request an extension from the EU beyond October 31 (conditions apply but that’s the gist of it). Johnson plans to send an accompanying letter saying the UK government does not want the extension, that is it wants an exit on October 31.
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Also, more from the weekend here:
  • EU officials adamant on no further Brexit extension
Earlier post on the UK media report on Prime Minister Boris Johnson plan to sabotage Brexit extension
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