GBP/USD and EUR/USD

Opinion: G-20 summit will offer a snapshot of global dysfunction

By Stratfor analysts
Published: July 5, 2017 7:43 a.m. ET

As Trump tries to pull the U.S. back from the global stage, other nations face an uncomfortable truth



When world leaders gather in Germany for the approaching G-20 summit, they will no doubt make a slew of assertions — some alarmist, others justified — about a U.S. retreat from the global stage.

Talk of leaders like German Chancellor Angela Merkel, French President Emmanuel Macron and Chinese President Xi Jinping stepping in to fill the void and uphold global governance on major issues such as free trade, climate change and security can be expected. But there is an underlying reality to that narrative that should be kept in mind.

Simply put, those hoping to fill the United States’ shoes in leading the world still have their own existential threats to contend with at home.

Germany and France are buying valuable time with their electorates to try to repair the European Union and make an example of the United Kingdom’s departure, but the bloc’s members still have vastly different visions of what European integration should look like and how nationalism might fit in.

China, meanwhile, is not a globalist power with a model of governance to offer the world; it is a fiercely nationalist power with global clout, caught between the compulsion to operate as a market economy and the imperative to centralize political power under the ruling Communist Party. None of these countries come close to matching the U.S. military footprint or the country’s ability to shoulder the burden that comes with superpower status.

Perhaps more important, though, is the fact that the United States may not be as able to relinquish its role in the world as it seems. U.S. corporations, interest groups, states and cities will all temper the moves made by the federal government, particularly on climate and trade matters.



Source : Market Watch

At G-20, world aligns against Trump policies ranging from free trade to climate change

The Washington Post
Michael Birnbaum, Damian Paletta 15 hrs ago


HAMBURG — The growing international isolation of the United States under President Trump was starkly apparent Friday as the leaders of major world economies mounted a near-united opposition front against Washington on issues ranging from climate to free trade.

At a gathering of the Group of 20 world economic powers normally a venue for drab displays of international comity there were tough clashes with the United States and even talk of a possible transatlantic trade war.


The tensions were a measure of Trumps sharp break with previous U.S. policies. They were also a warning signal of Washingtons diminished clout, as the leaders of the other 19 nations gathered in Hamburg mulled whether to fix their signatures to statements that would exclude Trump or to find some sort of compromise. Two European officials said they were leaning toward a united front against Washington.

German Chancellor Angela Merkel, whose difficult job it was to find some form of compromise, made little attempt to paper over the differences after the first day of meetings.

"The discussions are very difficult. I dont want to talk around that," Merkel said.

She described the view of most participants that we need free but also fair trade, a rejection of Trumps skepticism about the value of sweeping free-trade agreements. And she predicted that the lower-level officials charged with negotiating a final statement deep into the night had a lot of work ahead of them.


Source : MSN

Trump's G-20 Ends With Few Prizes, Little Consensus on His Goals

By Toluse Olorunnipa and Nick Wadhams
9‎ ‎Juli‎ ‎2017‎ ‎03‎.‎38‎ ‎WIB

 

1. Presidents team says climate disagreement not contentious
2. Other 19 nations write blueprint that largely cuts him out

Ahead of his first G-20 summit, Donald Trump took to Twitter to weigh in on his concerns.

From bad trade deals (the worst) to North Korea's nuclear ambitions (this nonsense) to steel dumping (dont like), Trump highlighted what hed hit head-on in Hamburg.

The problem for the president: he comes home from the Group of 20 summit with little concrete progress on those issues, while the differences between himself and the rest of the world are greater than ever.

Trump got lectured on trade by China and France and won platitudes from other nations -- but no evident progress -- on North Korea. The starkest difference was on climate: the G-20s final statement called the Paris accord irreversible. Trump abandoned the pact last month.

In his first sit-down with Russia’s Vladimir Putin, Trump’s twin concerns, Iran and Ukraine, were barely touched upon as the two agreed on a Syrian cease-fire, details to come. On North Korea, meetings between Trump and the leaders of South Korea, Japan and China ended without a clear consensus about how to curb North Korea’s nuclear ambitions. The words “North Korea” are not in the final communique.

This leaves Trump, already weakened at home by the swirling probes into his campaign, in danger of being undermined abroad as well, with a limited ability to rally world leaders to his most important causes, experts said.



Source : Bloomberg

Crash in bond markets, Fed mistake are investors’ biggest fears right now, survey finds

1. Cash balances held firm at 4.9 percent globally month, down only slightly from 5 percent in June. Still above the 10-year average.
2. Investors consider a crash in global bond markets (28%) and a policy mistake by the Fed/ECB (27%) to be the biggest tail risks to the market.
3. Banks overtake tech stocks as top overweight sector

Spriha Srivastava | @spriha
12 Hours Ago


Investors are more comfortable holding cash than investing in traditional assets because they consider a crash in global bond markets and a policy mistake by central banks to be the biggest risks to the market, according to a survey.

The Bank of America Merrill Lynch July Fund Manager Survey that polled 207 asset managers with $586 billion under management, showed that while the average cash balance has dipped to 4.9 percent from 5 percent last month, the 10-year average remains above 4.5 percent.

"Risk appetite remains equivocal with global cash balances still high at 4.9 percent despite clear inflection point lower in global growth/earnings per share estimates," the survey said


Investors' biggest fears

While 28 percent of those surveyed fear a crash in bond markets the most, 27 percent are concerned a central bank mistake is most likely to leave markets in troublesome waters.

It further pointed that fund managers are taking out more protection and cash positions. When asked why, 45 percent of investors who responded highlighted a bearish view on markets.



Source : CNBC

"The Most Dangerous Moment": Why Every Bank Is Suddenly Talking About Q3 2018

by Tyler Durden
Jul 19, 2017 3:48 PM



By now everyone is probably familiar with one of the scariest financial charts created recently by Bank of America: it shows that not only have central banks injected a record $15.1 trillion in liquidity since the crisis, but in 2017 alone - a time when the global economy is supposedly improving - they added a record $1.5 trillion, or as BofA's Michael Hartnett calculated, $3.1 trillion annualized.




Or maybe not: in a little noticed comment from Hartnett made later in June, Hartnett observed that "central banks in aggregate still printing: bought $350bn in April, $300bn in May, <$100bn in Junebig 5 central banks buying less but not yet selling."

And while the ECB quietly tapered from 80 to 60BN last December (even though Mario Draghi went to great lengths to described the tapering as a non-event) and is expected to announce a formal tapering again, most likely during Jackson Hole , nowhere is this quiet slowdown in central bank purchases more evident than in the balance sheet of the BOJ, whose average purchases have declined sharply in recent months from a JPY80trillion average to a far lower level:




Indeed, it is safe to say that the topic of the liquidity injection by central banks, or rather its removal, has become one of the most discussed topics within the financial community. Case in point, in a note from last week, Credit Suisse's Andrew Garthwaite wrote that "on a year-on-year basis, the aggregate balance sheet of the big 4 central banks is set to continue expanding through 2018, although the pace of expansion will steadily slow, as shown in the second chart below. Our estimates, which include our economists' assumptions on ECB, Fed and BoJ buying and keep current FX rates constant, suggest that it is Q3 2018 when the contraction in the Fed's balance sheet on a monthly basis (which at that point will be $40bn a month) will start to exceed the purchase of assets by the ECB and BoJ."





Source : Zero Hedge

ECB holds interest rates steady as traders eye Draghi comments on QE 'tapering'

1. European Central Bank (ECB) holds interest rates steady at 0.00 percent.
2. The central bank expected to announce tapering plans in September.

Karen Gilchrist | @_karengilchrist
12 Mins Ago



The European Central Bank (ECB) held interest rates steady Thursday, amid speculation that the bank will start to scale back its ultra-loose monetary policy in the fall.

Many market participants expect that improved economic growth in the euro zone will cause a shift away from years of easy money, underlined by interest rates being held at 0.00 percent for seventeen consecutive months.

The lack of movement on Thursday was widely anticipated, but ECB President Mario Draghi will have a thin line to tread in a press conference later in the session. He is expected to speak about this anticipated policy shift from the ECB, but not cause undue panic in asset markets.

Markets were shaken last month by hawkish comments from Draghi which suggested that the bank would steam ahead with interest rate hikes and the reduction of its bond-buying program - schemes used to inject cash into the economy.

During an ECB Forum in Sintra, Portugal, in June, Draghi said that "all the signs now point to a strengthening and broadening recovery in the euro area" and added the bank would need to be "persistent" and "prudent" in adjusting its parameters going forward.

The comments initiated a mini tantrum in financial markets as they caught a glimpse of the winding down of the unprecedented central bank stimulus which has characterized the last decade since the global financial crisis.

They came just weeks after the ECB's monthly policy meeting in which it dropped its reference to future rate cuts but insisted that interest rates could be expected to "remain at present levels for an extended period of time."



Source : CNBC

Fed Balance Sheet Shifts Into Limelight Absent Rate Hike Urgency

By Jeanna Smialek
@jeannasmialekMore stories by Jeanna Smialek
and Matthew Boesler
@boes_More stories by Matthew Boesler
‎
July‎ ‎26‎, ‎2017‎ ‎11‎:‎00‎ ‎AM‎ ‎+07

 

1. Statement by FOMC may clarify timing of asset rolloff plans
2. Weak inflation may prompt dovish tweaks to Fed’s views

If the Federal Reserve delivers any surprises at its meeting this week, they will probably come from news on when it plans to start shrinking its balance sheet.

Economists don’t foresee an interest-rate hike at the two-day gathering, which wraps up with a statement at 2 p.m. on Wednesday in Washington. Policy makers might update their language on inflation, because weakness in price data has persisted since they met in June, but those changes should be minor. There’s no press conference scheduled after this meeting.

A larger source of uncertainty stems from the timing of when the Fed will start to shrink its $4.5 trillion holdings of mainly Treasuries and mortgage-related debt. Everyone wants to know how the Fed will cut the bloat after building assets to record levels to help shield the U.S. economy during the financial crisis.


Read more on the Fed’s balance-sheet exit plan in this QuickTake

Officials expect to begin the process this year and Chair Janet Yellen has said it could get under way “relatively soon.” Her lack of specific guidance has economists
surveyed by Bloomberg looking toward the Fed’s meeting in September for an announcement, and the statement’s discussion of the balance sheet will be scrutinized for such a signal.

“It seems like they would like to get the process started in the Fall -- some type of open-ended language, like Yellen’s language ‘relatively soon,’ would suffice,” said Steven Friedman, senior economist at BNP Paribas Investment Partners in New York. “I don’t think they’ve done sufficient groundwork to prep the markets to start the process after the July meeting.”

Inflation Developments

June: “On a 12-month basis, inflation has declined recently and, like the measure excluding food and energy prices, is running somewhat below 2 percent.”

Since June inflation figures showed a fourth-straight month of weakness, the Fed’s inflation line is probably due for an update: Goldman Sachs economists say “declined recently” could shift to “declined further.”


Source : Bloomberg

Theres one thing the Fed could do to prove its critics wrong

By Pedro Nicolaci da Costa, Business Insider US
July 26, 2017


Federal Reserve officials repeat it so often its fair to call it a mantra: Every meeting is live.

That is, the Fed says it could take policy actions at any of its eight yearly meetings, not just the four that include press conferences that allow Fed Chair Janet Yellen to explain any moves in greater depth.

So far, the Fed has not proved its point in recent years it has taken policy actions only during meetings that include press conferences. This has caused market participants to largely discount meetings without press conferences, like this weeks gathering, as nothing burgers. The market is pricing in a 0% chance the Fed will hike interest rates at Wednesdays meeting, according to Bloombergs World Interest Rate Probability data.

This has prompted calls from both the press and some Fed officials, like the St. Louis Fed president, James Bullard, that Yellen should hold a press conference after every policy meeting.

That predilection aside, policymakers could take one easy step to prove its critics wrong: announce a timeline for when it intends to start a long-telegraphed, gradual reduction in the size of its balance sheet.

The Fed will accomplish this by slowly reducing the amount of maturing bonds from its $4.5 trillion portfolio, which expanded sharply during the Great Recession and weak recovery that followed. But it has yet to satiate traders desire for some clarity on the timing.



Source : Business Insider

Fed Says Balance-Sheet Unwind to Start `Relatively Soon'

By Craig Torres
@ctorresreporterMore stories by Craig Torres

‎July‎ ‎27‎, ‎2017‎ ‎1‎:‎00‎ ‎AM‎ ‎+07 ‎July‎ ‎27‎, ‎2017‎ ‎1‎:‎34‎ ‎AM‎ ‎+07

 

1. Decision sets up bond holdings announcement as early as Sept.
2. Committee keeps key interest rate unchanged at 1% to 1.25%

Federal Reserve officials said they would begin running off their $4.5 trillion balance sheet relatively soon and left their benchmark policy rate unchanged as they assess progress toward their inflation goal.

The start of balance-sheet normalization -- possibly as soon as September -- is another policy milestone in an economic recovery now in its ninth year. The Fed bought trillions of dollars of securities to lower long-term borrowing costs after cutting the main interest rate to zero in December 2008.

Near-term risks to the economic outlook appear roughly balanced, the Federal Open Market Committee said in a
statement Wednesday following a two-day meeting in Washington. Household spending and business fixed investment have continued to expand.

Fed watchers had anticipated that the inclusion of the term relatively soon would signal the central bank could announce the timing of the balance-sheet reduction program at its next meeting, scheduled for Sept. 19-20. U.S. stocks rose slightly and 10-year Treasury yields fell following the Feds statement.

I expect an announcement of the onset of the balance-sheet reduction at the conclusion of the September meeting, effective on the first of October, Carl Tannenbaum, chief economist at Northern Trust Corp. in Chicago, said after Wednesdays statement.


Source : Bloomberg

Press Release

July 26, 2017
Federal Reserve issues FOMC statement

For release at 2:00 p.m. EDT



Information received since the Federal Open Market Committee met in June indicates that the labor market has continued to strengthen and that economic activity has been rising moderately so far this year. Job gains have been solid, on average, since the beginning of the year, and the unemployment rate has declined. Household spending and business fixed investment have continued to expand. On a 12-month basis, overall inflation and the measure excluding food and energy prices have declined and are running below 2 percent. Market-based measures of inflation compensation remain low; survey-based measures of longer-term inflation expectations are little changed, on balance.

Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. The Committee continues to expect that, with gradual adjustments in the stance of monetary policy, economic activity will expand at a moderate pace, and labor market conditions will strengthen somewhat further. Inflation on a 12-month basis is expected to remain somewhat below 2 percent in the near term but to stabilize around the Committee's 2 percent objective over the medium term. Near-term risks to the economic outlook appear roughly balanced, but the Committee is monitoring inflation developments closely.

In view of realized and expected labor market conditions and inflation, the Committee decided to maintain the target range for the federal funds rate at 1 to 1-1/4 percent. The stance of monetary policy remains accommodative, thereby supporting some further strengthening in labor market conditions and a sustained return to 2 percent inflation.

In determining the timing and size of future adjustments to the target range for the federal funds rate, the Committee will assess realized and expected economic conditions relative to its objectives of maximum employment and 2 percent inflation. This assessment will take into account a wide range of information, including measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial and international developments. The Committee will carefully monitor actual and expected inflation developments relative to its symmetric inflation goal. The Committee expects that economic conditions will evolve in a manner that will warrant gradual increases in the federal funds rate; the federal funds rate is likely to remain, for some time, below levels that are expected to prevail in the longer run. However, the actual path of the federal funds rate will depend on the economic outlook as informed by incoming data.



Source : FOMC

Fed holds rates steady, expects portfolio cuts 'relatively soon'

#Business News
July 26, 2017 / 12:07 PM / 13 hours ago

Jason Lange and Lindsay Dunsmuir


WASHINGTON (Reuters) - The Federal Reserve kept interest rates unchanged on Wednesday and said it expected to start winding down its massive holdings of bonds "relatively soon" in a sign of confidence in the U.S. economy.

The Fed kept its benchmark lending rate in a target range of 1.00 percent to 1.25 percent, as expected, and said it was on track to continue the slow path of monetary tightening that has lifted rates by a percentage point since 2015.

In a statement following a two-day policy meeting, the U.S. central bank's rate-setting committee indicated the economy was growing moderately and job gains had been solid.

It also noted that both overall inflation and a measure of underlying price gains had declined - trends which have worried some policymakers - but that it expected the economy to continue strengthening.

"The committee expects to begin implementing its balance sheet normalization program relatively soon," the Fed said, adding that it would follow a plan outlined in June to trim its holdings of U.S. Treasury bonds and mortgage-backed securities.

U.S. stock prices rose following the release of the policy statement while yields on U.S. government debt fell. The dollar dropped against a basket of currencies.



Source : Reuters

Euro-Area Economy Steams Ahead as ECB Waits for Inflation

ByCatherine Bosley
@cbSwissMore stories by Catherine Bosley

‎August‎ ‎1‎, ‎2017‎ ‎4‎:‎00‎ ‎PM‎ ‎+07 ‎August‎ ‎1‎, ‎2017‎ ‎4‎:‎38‎ ‎PM‎ ‎+07

 

1. GDP increased 0.6% in second quarter, matching median estimate
2. ECB hopes stronger momentum will help price pressures build

The euro-area economy expanded apace in the second quarter, a sign the blocs upswing is becoming increasingly robust and self-sustaining.

Gross domestic product in the 19-country region rose 0.6 percent in the three months through June, after increasing 0.5 percent at the start of the year. Thats in line with the median estimate in a Bloomberg survey of economists.

Figures from economic confidence to joblessness and manufacturing output have signaled the economy was gaining steam, underpinning expectations by the
European Central Bank that price pressures would eventually begin to build. Policy makers are preparing for a debate in the autumn about the future path of quantitative easing, which has helped reduce financing costs for firms and households, thus stimulating demand.

The ECB expects solid, broad-based growth in the period ahead, and its pretty likely this will happen, said Holger Sandte, chief European analyst at Nordea Markets in Copenhagen. They will welcome these numbers but the focus will be on core ifnatlation -- whether it picks up and how fast.

France enjoyed its strongest continuous expansion since 2011 in the second quarter, driven by exports and investment, while Spain experienced the fastest growth since 2015, national data published last week showed. The Austrian economy also gathered pace, while Belgiums performance weakened.

A complete country breakdown will be available on Aug. 16, with details on GDP components due on Sept. 5.



Source : Bloomberg

Euro logs best run in five years and traders predict there's more to come

Spriha Srivastava | @spriha
24 Mins Ago


The euro is trading at levels not seen since January 2015 and has posted its best run in five years as dollar weakens and the euro zone economy starts to gradually improve.

On Tuesday, the euro hit a two-and-a-half year high against the dollar, trading just above $1.18 as investors look to move away from the risks surrounding the euro zone and focus on stronger fundamentals driving growth in the region.

"The euro is benefiting from a substantial compression in spreads, allied to removal of European political risks, the latter benefiting from the passage of the French election. The German election has moved to be seen almost as a non-event," Jeremy Stretch, head of G10 FX strategy at CIBC Capital Markets, told CNBC via email.

Stretch further explained that improved euro fundamentals, such as annual growth reaching levels not seen in six years, has allowed the European Central Bank to think about tightening its ultra-loose monetary policy. "The prospect of an easing in bond-buying will start to arrest the aggressive expansion in the ECB's balance sheet."

The euro is on course for its best year since 2003 when it ended the year up more than 12 percent. The currency has risen nearly 13 percent since the start of 2017 and has also posted its fifth monthly rise in a row, logging its best run in five years.

Since the start of the year, with the exception of February, the euro has ended the month on a positive note.



Here are the monthly runs for the euro since the start of the year:

1. January 3.3 percent
2. February Down 1.8 percent
3. March Nearly 1 percent
4. April 2.13 percent
5. May 3.15 percent
6. June 1.9 percent
7. July 3.5 percent

Dollar weakness or euro strength?



Source : CNBC

Britain could lose 40,000 investment banking jobs in Brexit exodus

1. 40,000 investment banking jobs could be slashed from the City of London post-Brexit, according to new estimates.
2. Consultancy firm Oliver Wyman predicts half of jobs in the U.K.'s wholesale banking sector could go.
3. Citigroup, UBS and Barclays are among a number of bank's announce plans to relocate staff to EU subsidiaries.

Karen Gilchrist | @_karengilchrist
1 Hour Ago

Allan Baxter | Photolibrary | Getty Images
The City of London at sunset


The U.K. could lose up to half of its investment banking jobs over the next few years if the government continues to pursue a hard-line exit from the EU, a new report has warned.

As many as 40,000 sales and trading and investment banking roles could move from the City of London to other European finance hubs as banks scramble to maintain access to the European single market once Britain leaves the bloc in 2019, according to estimates from consultancy Oliver Wyman.

Already a number of banks, including Citigroup, UBS and Barclays, have announced plans to relocate thousands of jobs to new subsidiaries across the EU. Financial services firms were given until July 14 to present the Bank of England with their contingency plans.

Initially these moves are expected to take between 12,000 and 17,000 wholesale banking jobs out of the U.K. capital. However, this number could rise to 40,000 over the longer-term as wholesale banks face uncertainty over clearing and seek to improve collaboration between staff.

"Banks have been working hard to design 'Day 1' operating models to ensure continuity of client service in the event of a hard Brexit. Although some banks may take the opportunity to restructure their European footprint more broadly, most are looking to minimize expense and disruption by relocating as little as possible in the first instance," the report released Tuesday noted.

Over the medium term, however, pressures are likely to grow for banks to move beyond their initial 'Day 1' operating models," it added. "These pressures are likely to lead wholesale banks to increase their presence inside the EU over time."



Source : CNBC

EUR/USD Breaks To Fresh 2.5 Year High On Last Trading Day For July

By Jignesh Davda
July 31, 2017 - 16:41 UTC



EUR/USD bulls are looking to end the month on a strong note. After a correction lower in early day trading, the pair found some ground following the European open and has recovered about 100 points since then. The pair has broken above last week’s high as well as several other levels of upside resistance.

Resistance at 1.1767 is a respected level on a monthly chart and had held the pair lower on two attempts last week. The pair broke through the level in the North American session and gained some upward momentum into the fix to break above the 200-period weekly moving average. The month end fix is known to cause volatile fluctuations and it will be more important where the exchange rate trades in relation to the moving average at the end of the week.

The push above the 1.1800 handle was swift and suggests stops from weak hands were triggered. The level will be pivotal for a short-term directional bias.

Eurostat reported a flash estimate for euro area inflation at 1.3% in the year to July, unchanged from the last reading and in line with expectations. The core CPI estimate improved to 1.2% on an annual basis from 1.1% versus the analyst consensus of 1.1%.

The seasonally adjusted unemployment rate improved to the lowest rate since early 2009. Eurostat recorded a rate of 9.1% in June, down from a revised 9.2% in May that was originally reported at 9.3%

EUR/USD has moved higher ahead of the set of releases and extended gains following it, but the overall impact as a result of the data was minimal.

Pending home sales in the United States were reported to rise 1.5% in June to beat the analyst estimate for a rise of 1.0%. On an annual basis, sales rose 0.7%.

The first level of support in EUR/USD is found at the psychological 1.1800 handle followed by 1.1767 which was important resistance last week. A sustained hold above the 1.1800 level shows the next area of upside interest at 1.1876 which marks the 2010 low.




Source : Economic Calendar

Dollar Slides Pushes GBP/USD To Fresh 10-Month Highs, BoE Caution Sets In
By Tim Clayton

August 1, 2017 - 10:05 UTC



Dollar vulnerability will remain dominant in the short term, although there is little immediate value in chasing GBP/USD higher from current levels with buyers waiting for more attractive levels ahead of Thursday’s Bank of England policy meeting.

The dollar came under strong selling pressure into Monday’s London fix with underlying weak US sentiment compounded by robust Euro demand. GBP/USD also gained support from the break above the 1.3160 resistance area which triggered a quick move to the 1.3200 area.

There were fresh concerns surrounding the US political situation with the dismissal of White House Communications Director Scaramucci after only 10 days in the post.

As the dollar remained under sustained pressure, GBP/USD advanced to fresh 10-month highs around 1.3230.

The Nationwide house-price index recorded a 0.3% gain in prices for July, although the year-on-year increase declined to 2.9% from 3.1%.

Sterling was subjected to a limited correction in early Europe on Tuesday with a GBP/USD retreat to test support around 1.3200 ahead of the UK data.

The UK PMI manufacturing index strengthened to 55.1 for July from a revised 54.2 the previous month and above consensus forecasts of 54.4.

There was firm growth in new orders with a notably strong advance in export orders for the month which will help underpin output growth, although there will be further concerns over lengthening delivery times

Market expectations are for the Bank of England to leave interest rates on hold at Thursday’s policy meeting, but the firm PMI data is likely to maintain some speculation that there will be a tightening bias and relatively hawkish policy statement.

Sterling will continue to gain some support from strength in oil and commodity prices with crude at 2-month highs as Brent traded just below the $53.0 p/b level. GBP/USD consolidated around 1.3225 ahead of the US open.

US data releases will be watched closely on Tuesday and firm data would underpin the dollar, although it will be difficult to jolt markets away from the current US selling mentality.




Source : Economic Calendar

#Business News
August 1, 2017 / 7:35 PM / 8 minutes ago

U.S. consumer spending edges up; income held back by drop in dividends

Lucia Mutikani


WASHINGTON (Reuters) - U.S. consumer spending barely rose in June as personal income failed to increase for the first time in seven months amid a decline in dividend payments, pointing to a moderate pace of consumption growth in the third quarter.

The Commerce Department said on Tuesday that consumer spending, which accounts for more than two-thirds of U.S. economic activity, edged up 0.1 percent in June after an upwardly revised 0.2 percent gain in May.

There was also little sign of inflation. The personal consumption expenditures (PCE) price index, excluding food and energy, rose 0.1 percent in June after a similar gain in May. In the 12 months through June, the so-called core PCE price index increased 1.5 percent after advancing by the same margin in May.

The core PCE is the Federal Reserve's preferred inflation measure. The U.S. central bank has a 2 percent target.

The data was included in the second-quarter gross domestic product report published last week. That report showed consumer spending increasing at a 2.8 percent annualized rate, which accounted for the bulk of the economy's 2.6 percent growth pace during the quarter.

U.S. stock index futures pared gains slightly after the data while the dollar .DXY held gains. Prices of U.S. Treasuries were trading lower.

The increase in consumer spending in June was in line with economists' expectations. Consumer spending was previously reported to have gained 0.1 percent in May.

When adjusted for inflation, consumer spending was unchanged after rising 0.2 percent in May. June's flat reading likely sets consumer spending on a moderate growth path in the third quarter.

Since accelerating at a 3.8 percent pace in the second quarter of 2016, consumer spending growth has remained below a 3.0 percent rate, restrained by sluggish wage gains.

In June, personal income was unchanged. That was the weakest reading since a 0.1 percent dip in November 2016 and followed a 0.3 percent increase in May.

Wages and salaries increased 0.4 percent in June. Personal dividend income declined 3.0 percent in June after surging 4.8 percent in May. Income at the disposal of households after accounting for inflation fell 0.1 percent, the largest decrease since last December. Savings slipped to $546.4 billion in June from $564.7 billion in May.



Source : Reuters

August 1, 2017 / 6:35 PM / 14 minutes ago

Dow opens at record; Apple earnings eyed

Tanya Agrawal


(Reuters) - U.S. stock indexes kicked off the month on a strong note, with the Dow coming within spitting distance of the 22,000 mark, powered by gains in Goldman Sachs (GS.N) and 3M (MMM.N).

The index had pierced through the 21,000 mark five months ago and had breached the 20,000 milestone in January.

All eyes will be on the quarterly performance of Dow-component Apple (AAPL.O), which reports results after the closing bell. The iPhone maker's shares were little changed.

Tech has been the best performing sector this year, despite the sector going through bouts of volatility of late on rising valuation concerns. The tech index .SPLRCT was up 0.27 percent in early trading.

Investors have been counting on earnings to support high valuations for equities. The S&P 500 is trading at about 18 times earnings estimates for the next 12 months, above its long-term average of 15 times.

S&P 500 earnings are expected on average to have grown 10.8 percent in the second quarter, according to Thomson Reuters I/B/E/S.



Source : Reuters

Fed Neutral Rate Estimate Drops, Lowest in Over Two Years

ByMatthew Boesler
@boes_More stories by Matthew Boesler

‎August‎ ‎2‎, ‎2017‎ ‎1‎:‎43‎ ‎AM‎ ‎+07




The so-called neutral U.S. interest rate fell in the second quarter by the most since 2010, according to a widely-cited estimate produced by Federal Reserve economist Thomas Laubach and San Francisco Fed President John Williams. The theoretical rate known in economic circles as r-star -- which is adjusted for inflation and would neither stimulate nor restrict an economy growing at its trend pace -- declined to -0.22 percent, from 0.12 percent in the first quarter. In comparison, the Feds benchmark rate, adjusted for core inflation, is currently -0.35 percent, which suggests the central bank is nearly at a neutral monetary policy setting, according to the model.



Source : Bloomberg

Opinion | Brexit

Brexit Reversal? The EU Should Say 'No Way'

Talk of the U.K.'s return should be alarming to anyone who cares about the EU's resurgence.

byLeonid Bershidsky
@BershidskyMore stories by Leonid Bershidsky

‎August‎ ‎1‎, ‎2017‎ ‎11‎:‎33‎ ‎PM‎ ‎+07




Though most U.K. politicians would have us believe that "Brexit is Brexit," European leaders have recently spoken of a reversal of the U.K.'s decision to leave the European Union as a real possibility. That should be alarming to anyone who cares about continuing the EU's resurgence since the 2016 vote.

For the first time, Im starting to believe that Brexit will not happen," Maltese Prime Minister Joseph Muscat said last week. "I see encouraging signs that the tide is turning." Muscat is knowledgeable about the Brexit process: His country held the EU's rotating presidency in January through June.

"Well I still hope that it wont happen," Irish Prime Minister Leo Varadkar said when asked about Brexit on Monday. He also knows more than most about Brexit because his country's border with the U.K. is one of the thorniest issues under negotiation.

There are good reasons why U.K. politicians, affiliated with both the government and the opposition, won't say similar things. Calling for another EU referendum did nothing for the Liberal Democrats in the June election. Most major figures in U.K. politics have pledged to respect the result of last year's Brexit vote. No one wants to be first with a risky reversal, even if some polls show that most Britons would now vote to remain in the EU. Foreign leaders such as Muscat and Varadkar have no such constraints, so their sudden optimism is a strong hint that the ground is shifting behind the scenes.

But those who, like Muscat and Varadkar, hope that Brexit won't actually happen should be careful what they wish for.

After the 2016 catharsis, the EU looks stronger both economically and politically. But it still has trouble defining its goals and even basic values, as evidenced by the current strife between Western and Eastern Europe. The easterners, led by Poland and Hungary, are pushing toward more authoritarian government and tougher measures to remain ethnically homogeneous. The Westerners stand on traditional liberal values and are softer on immigration despite pressure from right-wing parties. There are plenty of other divides, and new ones emerge constantly. Now, there's sudden tension between France and Italy over the former's decision to block the takeover of a major shipyard by an Italian company. French President Emmanuel Macron's foray into trying to settle the Libyan political crisis -- traditionally Italy's domain in Europe -- hasn't helped matters.

The EU bureaucracy and the bloc's core nations are trying to formulate a clearer common line on the union's future. The last thing they need is another centrifugal force -- and the U.K., with its current political establishment, would certainly be one. Even before Brexit burst into political reality, the U.K. was the most outvoted member state in the EU Council. Now, with millions of citizens who have voted against the EU, it would likely be even more contrary and anti-federalist.

The U.K. also had the most opt-outs of important EU policies -- the Schengen free travel area, the euro, the Charter of Fundamental Human Rights (the U.K. wanted to block the European Court of Justice from overruling its laws on Charter-related grounds) -- and, uniquely, a rebate on the EU budget. The U.K.'s ability to obtain these exemptions has inspired Eastern European countries -- whose English-speaking elites have long idolized Britain -- to seek their own opt-outs. If it hadn't been for the U.K. example, the euro area would probably be bigger today. When that example is eliminated, it will be easier for the EU to make a case for more uniformity and a closer union.



Source : Bloomberg