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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

A couple of Brexit scenarios to ponder (and what they mean for EUR/GBP)

  
Analysis, Forex
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An overnight bank note (Rabo) on Brexit and euro / sterling

(in brief, and note this prior to Wednesday’s UK voting)
If legislation to rule out a no deal Brexit is rushed through parliament, the pound can be expected to rise. If it were decided that the Brexit deadline were to be extended but that the legal default position of the UK remains that a no deal Brexit could still take place at a future date, GBP may also rise, but by a lesser amount – since kicking the can down the road is not a solution.
  • In this scenario we would expect EUR/GBP to be trading in the 0.90 area on a 1 to 3 month horizon.
If a no deal Brexit is ruled out will would expect EUR/GBP to clamber back towards the 0.86 area in 3 months. 
If fresh legislation is not passed and the UK remains on course for a no deal Brexit in October we would expect EUR/GBP to rise firstly back towards the recent high in the 0.9325 area. 
How high EUR/GBP can go may then depend on whether the EU summit in mid-October brings any compromises.” “On a no deal Brexit on October 31, we expect EUR/GBP to rise towards parity.

Wall Street drops on earnings as euro swings on ECB rhetoric

  
Analysis, US Market
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The S&P 500 retreated from a record high on Thursday as adverse reactions to a handful of corporate results weighed on the market and as the latest assessment of monetary policy rhetoric from the European Central Bank triggered a volatile session for the euro.

The US equities benchmark was down 0.5 per cent owing to poorly-received results from a number of technology and industrial companies.

American Airlines shed 8.4 per cent after saying it expected a larger hit to pre-tax earningsfrom the grounding of Boeing’s 737 Max jets. Southwest Airlines said it expected cost pressures from the grounding to weigh on results in the second half and decided it would cease operations out of Newark Liberty International airport, which helps serve the New York City area, although its shares managed to reverse early declines to finish roughly flat.

Rivals Delta Air Lines and United Airlines were both lower. Boeing remained under pressure, down nearly 4 per cent, after flagging on Wednesday it might have to cease production of the jet that was involved in two fatal crashes earlier this year.

Facebook and Tesla were down 2 per cent and nearly 14 per cent, respectively, after reporting results following Wednesday’s closing bell.

The leg down in US equities also came as investors digested better than expected US economic data that raised concerns that Federal Reserve policymakers may not be as dovish as markets expect at next week’s investor meeting.

There was much interest in the ECB, though. As President Mario Draghi gave his regular press conference after leaving interest rates on hold, investors measured his words against hopes for a return to economic stimulus in the region, which had pointed to more bond-buying as soon as September.

It sent the euro on a volatile run, and a rally for the region’s government bonds also faded, drawing yields higher as the trading day developed. Stocks also dropped back from highs, although banking shares remained in demand.

The shared currency bounced up off two-year lows after Mr Draghi spoke to reporters, and was about flat at $1.1144.

European stocks were also unsettled, with the extent of the ECB’s concern at an economic slowdown outweighing the hopes for fresh stimulus. Frankfurt’s Xetra Dax stood out, falling back by 1.3 per cent, surrendering earlier gains that took it up as much as 0.6 per cent for the session.

ECB monetary policy meeting today – preview of a live one – and where to for the EUR.

  
  Analysis
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The European Central Bank Governing Council will be dovish today, and may even cut the main rate.

  • 1145 GMT for the announcement
  • 1230 GMT is President Draghi’s press conference
  • Most expect the depo rate to remain on hold at -0.4%, although the probability of a cut (to 0.5%) is priced around 38% … which is not negligible …. this meeting is ‘live’.
Here’s a quick preview from TD:
  • The odds of a dovishly more proactive ECB look twice as high as those of a hawkish disappointment
  • The press conference is key to the ECB’s view on the rate floor, potential QE, low inflation expectations, and reinforcing a “symmetric” inflation target
And, on the euro:
  • With our base case fully priced and EUR weak, we see some scope upside if Draghi delivers as expected.
  • Dovish risks prevail, which could send EURUSD lower into fresh ranges. 
  • Next week’s FOMC may constrain follow-through.
European Central Bank dovish draghi

Greece bailout package 'agreed by Germany and France'

  
Economy, Education
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The deal will also involve the International Monetary Fund and is expected to include 22 billion euros of funding for Greece, sources said.

It is now up to European Union President Herman Van Rompuy to call a summit of eurozone leaders possibly later tonight to consider the French-German deal, after talks attended by all 27 European Union heads of state.

The meeting would ask Van Rompuy to draw up detailed plans “before year end to show all the options possible” for bailing out eurozone nations in future. That would include preventive measures and sanctions, a diplomat said.

Spanish government spokeswoman Cristina Gallach said she could not confirm any deal but that Spain – which heads most European Union talks because it holds the EU’s rotating presidency – was “hopeful” that a solution could be found at the talks for Greece’s debt woes.

Mario Draghi's Favorite Joke

  
Education, Humour
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In his latest “What Next in The Global Economy” note, Morgan Stanley economist Joachim Fels passes along the following little story about Mario Draghi:

 Who said central bankers have no sense of humour? During a recent dinner at Frankfurt’s Senckenberg Museum (the home of Germany’s most extensive collection of dinosaurs) Mario Draghi told the crowd his favourite joke:

A man needs a heart transplant. Says the doctor: “I can give you the heart of a five-year old boy.” “Too young.” “How about that of a forty-year old investment banker?” “They don’t have a heart.” “A seventy-five year old central banker?” “I’ll take it.” “But why?” “It’s never been used!”

I like the joke, and not only because I consider myself an economist working for an investment bank rather than an investment banker. Mario Draghi’s joke conveys a simple but important message: central banking is about making rational, cool-headed and unemotional decisions in often difficult circumstances. In the 15 years of its existence as the keeper of the euro, the ECB led by Mario Draghi and his predecessors Jean-Claude Trichet and Wim Duisenberg has had to make a lot of difficult decisions in difficult circumstances. A few of these decisions were questionable (though typically only with the benefit of hindsight), such as the rate cut in April 1999 or the rate hikes in July 2008 and in April and July 2011. Most of the other ECB decisions were just right or even hugely successful – just think of Mario Draghi’s announcement in July 2012 to “do whatever it takes” to safeguard the euro. (more…)

Eurozone December inflation stays low at 0.8%

  
Analysis, Education
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The eurozone’s annual inflation rate for December has just been confirmed at 0.8 per cent, in line with expectations and the preliminary reading of the data.

Eurostat, the EU’s offical data provider, also confirmed that prices in the last month of 2013 rose by 0.3 per cent from November in the shared currency area.

From the full release:

The largest upward impacts to euro area annual inflation came from electricity (+0.11 percentage points), tobacco (+0.08) and restaurants & cafés (+0.05), while telecommunications (-0.14), fuels for transport (-0.13) and medical & paramedical services (-0.07) had the biggest downward impacts.

The European Central Bank’s inflation target is 2 per cent.

If inflation stays significantly below target in the months ahead, it is likely to stoke calls for the ECB to do more. If price pressures were to continue to disappoint, the most likely options would be another cut to the benchmark main refinancing rate or negative deposit rates, which amount to a levy on banks for funds parked in the central bank’s coffers. (more…)

Greece – About to Hit the Panic Button?

  
Analysis, Economy, Education
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Well it would appear that all the talk of the European Union and the IMF standing at the ready did not calm the markets when it was being discussed over the past month. It was hoped that the markets would be calmed if they knew that Greece had support from its neighbors.

That was Plan A, now it is time for Plan B, or C, D, E…

The Greek government’s cost of borrowing has hit a new high as talks on a joint eurozone and International Monetary Fund (IMF) rescue plan begin.

The interest rate on 10-year government bonds hit 8.3% – the highest since the euro was introduced.

Rates rose as it became clear that talks over the aid package may not be finished until days before a multi-billion-euro loan is due for repayment.

Investors are becoming more convinced that Greece will need to be rescued.

Greece’s finance ministry said the talks with the European Commission and the IMF would take about two weeks, with a joint text issued on about 15 May. […] (BBC)

It would appear that Greece is about to hit the button

Wednesday, April 21, 2010 1:27:13 PM
Greece Fin Min: Will make decision on whether or not to trigger the aid mechanism soon – Notes that the IMF will have discussions over the competitiveness of the country. No further austerity measures this year are likely.

Japan to allow fingerprint authorization for visitors

  
Analysis, Education
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Visitors to Japan will be able to use their fingerprints instead of passports to identify themselves at some hotels thanks to technology introduced by a Tokyo venture.

With financial help from the economy and industry ministry, Liquid will start offering a fingerprint-based authorization system by March in a bid to increase travel convenience. Some 80 hotels and Japanese-style inns in major tourist spots like Hakone and Atami, two hot spring resort areas not far from Tokyo, will be among the first to install the system. More inns and hotels will follow.

 The ministry will cover part of the installation costs.

Visitors to Japan can register their fingerprints along with their passport information in their home countries or at registration spots at airports or elsewhere in Japan. Foreign travelers can then identify themselves at a hotel’s front desk by waving their fingers over a contactless device.

Japanese law requires hotels to check and keep copies of foreigners’ passports. But the economy ministry and the ministry of labor have decided to treat “digital passports” as legitimate alternatives.

George Soros Warns Washington To "Mend Relations With China" Or Face World War 3

  
Analysis, Education
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A Partnership with China to Avoid World War (via The New York Review of Books)

International cooperation is in decline both in the political and financial spheres. The UN has failed to address any of the major conflicts since the end of the cold war; the 2009 Copenhagen Climate Change Conference left a sour aftertaste; the World Trade Organization hasn’t concluded a major trade round since 1994. The International Monetary Fund’s legitimacy is increasingly questioned because of its outdated governance, and the G20, which emerged during the financial crisis of 2008 as a potentially powerful instrument of international cooperation, seems to have lost its way. In all areas, national, sectarian, business, and other special interests take precedence over the common interest. This trend has now reached a point where instead of a global order we have to speak of global disorder.

In the political sphere local conflicts fester and multiply. Taken individually these conflicts could possibly be solved but they tend to be interconnected and the losers in one conflict tend to become the spoilers in others. For instance, the Syrian crisis deteriorated when Putin’s Russia and the Iranian government came to Bashar al-Assad’s rescue, each for its own reasons. Saudi Arabia provided the seed money for ISIS and Iran instigated the Houthi rebellion in Yemen to retaliate against Saudi Arabia. Bibi Netanyahu tried to turn the US Congress against the nuclear treaty the US was negotiating with Iran. There are just too many conflicts for international public opinion to exert a positive influence.

In the financial sphere the Bretton Woods institutions—the IMF and the World Bank—have lost their monopoly position. Under Chinese leadership, a parallel set of institutions is emerging. Will they be in conflict or will they find a way to cooperate? Since the financial and the political spheres are also interconnected, the future course of history will greatly depend on how China tackles its economic transition from investment and export-led growth to greater dependence on domestic demand, and how the US reacts to it. A strategic partnership between the US and China could prevent the evolution of two power blocks that may be drawn into military conflict. (more…)

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