Archives of “January 2020” month

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US Treasury says real dollar is 8% above its 20 year average

  
  Analysis
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Treasury’s semi-annual report does not list China as a currency manipulator

US Treasury:
  • says currency practices of 10 countries require close attention, but no major US trade partner met criteria for currency manipulation
  • Says China made ‘enforceable commitments to refrain from competitive devaluation’ in phase 1 trade deal withUS
  • says China should ‘no longer be designated as a currency manipulator’ in semi-annual currency report
  • China needs to take necessary steps to avoid a persistently weak currency
  • China also agreed in trade deal to publish relevant data on exchange rates and external balances
  • Says improved economic fundamentals and structural policy reforms would underpin stronger Chinese yuan over time
  • Says continuing to monitor currency practices of China, Germany, Ireland, Italy, Japan, South Korea, Malaysia, Singapore, Vietnam and Switzerland
  • China must take decisive steps to further rebalance economy, allow greater market openness to strengthen long-term growth prospects
  • Switzerland should use ample fiscal space to more forcefully support domestic activity – treasury
  • Japan should enact bolder structural reforms to strengthen domestic demand
  • Germany’s current account surplus remains largest in world, sees urgent need for Germany to cut taxes, boost domestic investment
  • Ireland only meets one of three criteria to be on monitoring list, would be removed in next report if that remains the case
  • Taiwan, Thailand close to triggering thresholds to be added to currency monitoring list
  • continued dollar strength is “concerning” given INF’s judgment that dollar is overvalued on a real effective basis
  • Says real dollar remains about 8% above its 20-year average; sustained dollar strength would likely exacerbate persistent trade, current account imbalances

I wonder if politics played a role in removing the currency manipulator label from China? LOL, I’m kidding. I am not wondering at all.

Treasury's semi-annual report does not list China as a currency manipulator 

The US is about to remove ‘currency manipulator’ tag from China – report

  
Analysis, Forex

US with a gesture ahead of trade deal

China’s delegation arrived in Washington today ahead of Wednesday’s ‘phase one’ trade deal signing.
The US designated China a currency manipulator in August in what was a token gesture.
Fox’s Edward Lawrence reports that the designation will be removed imminently (or is that eminently?)
Sr Administration Official tells me Foreign Exchange report is expected to come out before China signs Phase One trade deal. Source in #China tells me today the Chinese will be removed as a currency manipulator in the report. Chinese trade sources wanted off to sign #trade deal.
USD/CNY fell below 6.9 today for the first time since August.
The report has given a further lift to risk trades.
How about a sell-the-fact on the deal signing?

European shares end the session mixed

  
Analysis, Global Indices

German DAX, -0.3%. UK FTSE, up 0.3%

The major European indices are ending the day with mixed results.  Looking at the provisional closes:

  • German DAX, -0.3%
  • France’s CAC, -0.12%
  • UK’s FTSE 100, +0.31%
  • Spain’s Ibex, -0.32%
  • Italy’s FTSE MIB, -0.6%
  • Portugal’s PSI 20, unchanged
In the debt market, the benchmark 10 year yields are mostly higher with the exception of the UK at -2.1 basis points.
German DAX, -0.3%. UK FTSE, up 0.3%_
In other markets,
  • Spot gold is trading down $10.11 or my 0.65% at $1552.29
  • WTI crude oil futures are trading down at $0.74 or -1.25% at $58.30. The low reached $57.97
In the US stock market, the major indices are trading near high levels. The S&P index and NASDAQ index are also above their highest close levels.
  • The S&P index up 13.77 points or 0.42% at 3279.17. The high close was 3274.70.
  • The NASDAQ index is trading up 54.7 points or 0.60% at 9233.55. The high close for it was at 9203.42. The all-time intraday high is up at 9235.19. The price is close to breaking that level
  • The Dow industrial average is up 58 points or 0.20% at 28883. The high close for its is at 28956.90. The price remains below that level

Chinese trade delegation en route to Washington to sign Phase One trade deal – Global Times

  
  Analysis
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Global Times with a tweet update on the matter

US China

The update reads:

The Chinese trade delegation led by Vice Premier Liu He has left Beijing en route to Washington DC to sign the phase one #tradedeal with US officials, a source told the Global Times on Monday. #tradetalks #tradewar

It looks like all is going according to plan and schedule – at least for now – with the deal expected to be signed off later in the week on 15 January.
As mentioned before, the details of the deal will be of particular importance so look towards that bit of information next as to how market participants will tie all of this to US-China trade sentiment in the bigger picture.
So far, markets are keeping more steady in the run up to the trade deal signing with risk faring rather decently today. USD/JPY is still keeping at fresh seven-month highs around 109.90 while gold is down by 0.7% around $1,550 at the moment.
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