BoE welcomes agreement between UK and EU27 on implementation period; US to restrict Chinese investments

Mar 29 • Morning Roll Call • 1144 Views • Comments Off on BoE welcomes agreement between UK and EU27 on implementation period; US to restrict Chinese investments

The Bank of England has provided some highlights update on the regulatory approach to preparations for EU withdrawal, released yesterday. Namely, BoE presumes that there will continue to be a high degree of supervisory cooperation between UK and EU post-Brexit and believes it will be difficult for all financial institutions to complete all of steps necessary to mitigate risks to provision of financial services in UK, EU. It said that banks may assume that authorization is needed only after transition and it would be reasonable for financial services firms to plan that they will be able to continue undertaking activities during implementation period.

Coming back to the hot topic of US to restrict Chinese investments, the Trump administration is considering to restrict Chinese investments in tech companies. Trump has given Treasury Secretary Mnuchin 60 days to come up with solutions after the results of the US investigation on Chinese theft of US intellectual property rights and this is likely one of them. The story was partly backed by comments from Commerce Secretary Wilbur Ross. It is still expected the trade war to end up being more verbal than economical but in any case, it is going to be very slowly fought and not a theme that will go away for the next couple of months (at least).

Continuing on Trump, the EU commission told EU governments that they must stand united and be ready to “think outside the box” in talks with the US to gain permanent exemption from Trump’s tariffs. The commission briefed ambassadors in Brussels yesterday about how to go forward in dealing with the Trump administration ahead of the 1 May deadline for the temporary tariffs exemption. The commission has ruled out reviving negotiations on a broad EU-US free trade agreement or offering unilateral European concessions to the US.
With regards to the macroeconomic news form the US yesterday, the US real gross domestic product (GDP) increased at an annual rate of 2.9% in the fourth quarter of 2017 as against the third quarter real GDP growth of 3.2%. The price index for gross domestic purchases increased 2.5 percent in the fourth quarter, compared with an increase of 1.7 percent in the third quarter; the PCE price index increased 2.7 percent, compared with an increase of 1.5 percent, and excluding food and energy prices, the PCE price index increased 1.9 percent, compared with an increase of 1.3 percent.

Tomorrow the U.S. economic calendar is bringing initial jobless claims may dip 5k to 224k for the March 24 week), with personal income forecast to rise 0.5% in February and spending seen +0.3% core PCE prices may remain at a lowly 1.5% y/y for the fifth consecutive time. Chicago PMI is set to rise to 62.0 in March from 61.9. From Canada the highlight is January GDP), expected to rise 0.1% after the 0.1% gain in December. The industrial product price index is projected to rise 0.1% in February (m/m, nsa) after a 0.3% gain in January as the dip in gasoline prices restrains growth in the index. The CFIB’s Business Barometer survey of small and medium business sentiment for March is due today as well. Europe will start to hunker down going into the long Easter Holiday weekend, but the calendar still holds key data releases. The German HICP firming back to 1.6% y/y from 1.2% y/y. It is expected that the German official jobless number is likely to dip by a further -15K, leaving the jobless rate at a very low 5.4%. German wage growth is indeed picking up, but the doves at the ECB argue that with more people entering the labor market, official figures underestimate the wider level of underemployment. PMIs, ZEW and Ifo surveys all declined in March and the Eurozone ESI economic confidence indicator is expected to fall back to 113.4 from 114.1, thus backing the ECB’s cautious stance. Still, while there is some disagreement over the degree of slack remaining in the economy, and how urgent is the need to phase out of exceptional measures, it is still pretty clear that the ECB is preparing to end net asset purchases by the end of the year. Officials don’t seem in a hurry though to commit to such a step just yet, however, and if volatility remains high, Draghi could delay a clarification of the future of QE until July, still well ahead of the end of the current QE schedule in September. The data calendar meanwhile also includes Eurozone M3 numbers, German import price inflation and consumer confidence as well as Italian confidence data and industrial orders and finally French consumer spending numbers. –FXStreet

EUR/USD

The Euro declined in Wednesday’s action as broad markets bid up the US Dollar across the broader currency bloc, reaching into the 1.2300 major handle before bouncing back slightly in the Asia session. –FXStreet
GBP/USD

The cable’s retreat from 1.4244 (March 27 high) to 1.4060 (Asian session low) suggests the rally from the March 1 low of 1.3712 may have run out of steam. The decline could be associated with the broad-based USD rally, possibly fuelled by quarter end flows, rising USD borrowing costs (as represented by Libor-OIS spread), and an upward revision of the US Q4 GDP. –FXStreet

USD/JPY

From a technical point of view and in the short-term, the pair is poised to extend its advance, as in the 4 hours chart it´s currently advancing above the 200 SMA for the first time since early January, while technical indicators maintain their bullish slope near overbought readings. The pair will face the next strong resistance at 107.28, March 13th high. –FXStreet
Gold

Gold is trading at around $1,324.76 as it plummeted 1.48% on Wednesday. The greenback came back to life and gold bears managed to print one of the worst daily decline since the start of 2018. –FXStreet

 

ECONOMIC CALENDAR EVENTS FOR March 29th

EUR German Preliminary CPI m/m
GBP Current Account
GBP Final GDP q/q
GDP Net Lending to Individuals m/m
CAD GDP m/m
CAD RMPI m/m
USD Core PCE Price Index m/m
USD Personal Spending m/m
USD Unemployment Claims
USD Chicago PMI
USD Revised UoM Consumer Sentiment

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