ALPHA Market Update 10 October 2018

10.10.2018

Market Update

 

 

United States

  • The Core PPI data will be released at 13:30
  • Due to the U.S. ambassador to the United Nations, Haley, unexpectedly resigned, the dollar basically retreated within the day.
  • Trump said that the US economy does not have inflation problems. He believes that it is not necessary to raise interest rates so quickly. This is the second time Trump has publicly expressed dissatisfaction with the interest rate hike.

Europe

  • THE European Union could offer Britain with a deal that will be “much more” than Canada’s Comprehensive Economic and Trade Agreement (CETA) but it is “impossible” to get a frictionless trade after Brexit, claimed former EU Council legal chief Jean-Claude Piris. Jean-Claude Piris, who served on the Legal Counsel of the European Council, said the European Union is likely to sway towards a Canada-style agreement with Britain after Brexit. BBC Radio 4 Today Programme host Nick Robinson said to the former EU lawyer: “You’re a lawyer, Jean-Claude Piris. You’re saying ‘no you can’t do this – it’s going to be the ECJ and you can’t cherry pick in the four freedoms. “Surely, if Europe wants to do it, if the bosses of BMW and all the rest say it is in all of our interests to have no friction for the trading goods – the politicians could do it.” The former European Union Council lawyer insisted the EU can do “as less friction as possible” on trade with the UK outside of the single market and “is ready to do it”.

United Kingdom

  • The British pound rallied to its highest level this month and UK government bonds sold off on Tuesday following media speculation Brexit divorce terms could be settled by Monday. The pound had been down by as much as 0.4 per cent against the US dollar earlier today, but turned sharply higher in late morning trade in New York to be 0.4 per cent stronger at $1.3143, around its strongest level since September 27.

Commodities

  • Crude oil futures were lower during mid-morning trade in Asia Wednesday ahead of the release of US crude inventory data that was expected to show a build, while supply concerns stemming from looming Iran sanctions and a hurricane in the US Gulf Coast stemmed the decline.
  • Oil prices rallied last week to their highest level since November 2014, with Brent Crude hitting $86 and WTI Crude rising above $75 a barrel at one point in the middle of the week.

Australia

  • AUD steadied this morning after stimulus from the People’s Bank of China (PBOC) helped stem an exodus from Chinese stocks and to stabilise CNY, but analysts say AUD will soon come under renewed pressure. The PBOC cut the reserve ratio requirement for a range of large commercial banks by 1% Monday in the hope of encouraging new lending to businesses.
  • It said the move will unlock as much as CNY 750 billion (£82 billion) for new lending while giving struggling banks a lifeline through which they can find the CNY 450b due for repayment to the central bank on October 15.
  • NZD fell to new lows Tuesday despite official data casting the government’s financial books in a more favourable light than previously thought, emphasising the extent to which the Kiwi is being driven by an unsupportive global environment.

New Zealand

  • New Zealand’s government ran a larger-than-expected budget surplus for the year to the end of June 2018, according to data released this week, with the operating balance before gains and losses coming in at $5.5 billion. This is up $1.5 billion from the previous year and ahead of government forecasts.
  • Higher than expected tax revenues as well as lower government spending were the main drivers behind the surplus. Lower spending was largely the result of delays to government projects that will soon be unwound but the better tax revenues resulted from the economy’s resilient performance over the last year according to the Treasury.
  • That decline, alongside persistent below-target inflation, has had currency markets fearing a rate cut from the RBNZ this year, which explains a sizeable portion of NZD’s losses for 2018.
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