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US/China Relations Remain Center of Attention

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US/China Relations Remain Center of Attention              

  • Markets are on a better footing as the equity rout takes a pause at the end of what has been a painful week. Sentiment has been helped by reports that the US Treasury Department staff has recommended China is not a currency manipulator, ahead of the much-anticipated US Treasury Currency Report next week. Mnuchin can choose to accept or reject the findings, but Citi analysts are inclined towards the former.

 

 

EUR & GBP: Italy approaches deadline to submit draft budget; Brexit headline noise ramps up ahead of the EU Summit  

  • The Italian cabinet is likely to meet on Monday to discuss the budget law, Ansa newswire reported. The government will then submit the budget law to the parliament for discussion.

 

  • The vote on a new state assembly in Bavaria took place on October 14, and is the first major test at the polling booths for Merkel’s fourth government. Chancellor Merkel’s Grand Coalition may come under renewed political pressure if polls are correct in predicting heavy losses for the CDU, CSU and SPD in regional elections in Bavaria (14 October) and Hessen (28 October). Further tensions in Berlin could increase worries for the Eurozone.

 

  • Meanwhile in UK, PM Theresa May could agree indefinitely to any backstop agreements after her Brexit ‘war Cabinet’ meeting on Thursday. However she is facing pressure from both hard Brexiteers and her Northern Ireland ally the DUP to ensure it is only a temporary arrangement. UK media is speculating that a number of Cabinet ministers could quit if the PM agrees to the EU’s demands. Things are coming to a head as we approach this week’s EU Summit.

 

 

Commodity Bloc: AUD ends the week well​​​​​​​

  • AUDUSD has been very resilient in rejecting 0.7050 support last week. August home loans came in worse than expected at -2.1%MoM versus -1% forecast. The investment lending is slightly better at -1.1% versus -1.3% expected. Meanwhile the release of the latest RBA Financial Stability Review had little impact.

 

 

Asia EM: MAS continued normalization​​​​​​​

  • USDCNY and USDCNH climbed higher on Friday after a higher than expected fixing. Data was ignored, although the trade surplus numbers showed a significant positive surprise at USD31.7bn versus 19.2bn expected. Exports are solid at 14.5% YoY versus 8.2% expected and imports have done well coming at 14.3% versus 15.3% expected.

 

  • Singapore central bank, MAS, continued normalization with an estimated 50bps “slight” and “measured” slope steepening, with no change to the width or the center. On the data front, Q3 GDP surprised to the upside at 2.6%YoY vs 2.4% expected, despite an upward revision to Q2 form 3.9% to 4.1%. Retail sales came in better than expected as well, declining just -0.4%YoY vs -1.3% consensus forecast.

 

 

 

This is an extract from the Daily Currency Update, dated 15th October 2018. 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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