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FX

No real new trade catalysts

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USD: Rounding up the latest trade headlines: US Treasury Secretary stated that President Trump just wants a level playing field with China, speaking in a FBN interview. Phase one deal is a step in the right direction.

  • USD: Meanwhile a FT report highlighted hints from USTR Lighthizer that Washington is ready to raise stakes with the EU after progress on China and Nafta. The article highlights comments by Lighthizer that the US had a “very unbalanced relationship” with Europe on trade, with an annual bilateral deficit of up to $180bn this year, which was unsustainable for Washington. “We’ve put tariffs in place on a variety of products, and we’re going to continue to focus on that. It’s something the president cares about. You can’t get the global trade deficit down without getting the trade deficit down with Europe,” he added.

 

JPY: Japan’s cabinet approved a record budget for next fiscal year, amounting to JPY102.7tn. Outlays on social security will account for about 57% of spending outside of debt servicing and transfers to regional governments.

  • JPY: Nationwide core CPI (excluding fresh food) rose 0.5% YoY in November, up from a 0.4% YoY increase in October. Citi Economics points out that if you exclude the impact of the tax hike and free education initiative, core CPI inflation was 0.2% YoY in November as in October.

 

GBP: Brexit - MPs vote by 358 to 234 to pass the withdrawal agreement bill

  • GBP: Parliament has passed a historic milestone towards leaving the European Union, backing Boris Johnson’s Brexit bill by a thumping majority of 124, a week after the Conservatives won a landslide victory in the general election. After comfortably passing its second reading by 358 votes to 234, the withdrawal agreement bill is on track to complete its passage through both houses of parliament in time to allow Britain to leave the European Union at the end of January.
  • GBP: On the BoE, first rumoured and now confirmed, Andrew Bailey will become the next Governor of the BoE. His term will last 8 years. Citi analysts believe that the short-term easing bias stays, as does the long term hiking bias. Overall it is too early to call of a cut.

 

Commodity Bloc: Strong employment see AUD gaining; NZ Q3 GDP expanded

  • AUD: Strong employment saw AUDUSD trade as high as 0.6880, undoing some recent weakness following dovish RBA minutes earlier in the week. 39.9k jobs were added in November vs market consensus for a 15k print. The October print was, however, revised lower to -24.8k from -19k. Unemployment consequently ticked lower to 5.2% from 5.3% while the participation rate remained steady at 66%.
  • NZD: Q3 GDP expanded by 0.7% in Q3 vs 0.5% market consensus. Robust consumption and government spending were two notable drivers of the beat. However, there was a substantial downgrade to Q2 growth, which was revised from 0.5% to 0.1%QoQ. Mining, manufacturing and construction drove this downward revision.

 

CNY: Little Changed

  • CNY: USD/CNY had little reaction to the latest trade headlines. As a reminder, US Treasury Secretary Mnuchin was interviewed on CNBC Thursday. He said that phase one is currently going through a technical and legal review and will be released and signed in early January.

 

 

This is an extract from the Daily Currency Update, dated December 23, 2019. Please approach a Citigold Relationship Manager if you would like more information.

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MARKET SPECIFIC DISCLOSURES

Market Specific Disclosures

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This communication is for general information only, is not intended as a recommendation or an offer or solicitation for the purchase or sale of any products or services and should not be relied upon as financial advice. The information herein
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