Forex Blog

April 23, 2014

Four Experts Analyze the Impact of TPP

It is poised to be the world’s biggest ever free trade deal and possibly its most ambitious. A dozen countries are negotiating the Trans-Pacific Partnership (TPP), which if successful, will account for two-fifths of world trade.

Those countries are the US, Japan, Brunei, Malaysia, Vietnam, Singapore, Australia, New Zealand, Canada, Mexico, Chile and Peru.

But will pushing through such a pact prove too gargantuan a task? And will China continue to be left out of talks?

Four experts give their views on what’s at stake for the US, Japan, China and Vietnam.

via BBC

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GBP/USD – Pound Dips After BOE Minutes

GBP/USD has reversed directions on Wednesday, dipping below the 1.68 line. In UK releases, the BOE minutes from its last policy meeting pointed to disagreements over the economy. Public Sector Net Borrowing pointed to a smaller deficit, while Industrial Order Expectations dropped sharply. In the US, New Home Sales slipped badly, dropping to an eight-month low.

There is no arguing that the British economy has enjoyed a strong recovery, but that does not mean that policymakers at the BOE see eye-to-eye on the health of the economy or inflation. The minutes of the previous policy meeting indicated that Monetary Policy Committee members were “uncertain” about the amount of spare capacity in the economy and the medium-term inflation outlook. Importantly, the MPC voted unanimously to maintain the benchmark interest rate at 0.50%. With the unemployment rate down to 6.9%, there is growing speculation that we could see a rate hike as early as next spring, although the BOE has done its best to dampen expectations of a rate increase.

In the US, New Home Sales was a disaster, as the key indicator plunged to 384 thousand in March, down from 440 thousand in the previous release. The weak reading was nowhere near the estimate of 455 thousand, and marked an eight-month low for the key housing indicator. The housing sector is showing signs of weakness, as both New Home Sales and Existing Home Sales have been on a sustained downward trend.

The markets haven’t reacted to events in Ukraine so far, but that could change if the violence in the east of the country worsens. Russian President Vladimir Putin has threatened to act on his “right” to invade Ukraine, and has also given the country an ultimatum regarding its gas debt. The gas supply from Russia to western Europe is in danger, and if the situation spills out of control, we could see a sharp response from the markets. US Vice-President Joe Biden is in Kiev for a symbolic visit. The West doesn’t have many cards to play against Russia, so every move by Putin will be scrutinized and could impact on the markets.

 

GBP/USD for Wednesday, April 23, 2014

Forex Rate Graph 21/1/13

GBP/USD April 23 at 14:30 GMT

GBP/USD 1.6788 H: 1.6836 L: 1.6781

 

GBP/USD Technical

S3 S2 S1 R1 R2 R3
1.6549 1.6705 1.6765 1.6896 1.7000 1.7210

 

  • GBP/USD has dropped below the 1.68 line, wiping out Tuesday’s gains. in Tuesday trade.
  • 1.6765 has weakened as the pound has lost ground. The next support line is 1.6705, which is protecting the 1.67 line.
  • 1.6896 is a strong resistance line, protecting the key 1.70 level.

Further levels in both directions:

  • Below: 1.6765, 1.6705, 1.6549 and 1.6416
  • Above: 1.6896, 1.70, 1.7210 and 1.7374.

 

OANDA’s Open Positions Ratio

GBP/USD ratio is pointing to gains in short positions on Wednesday. This is consistent with the movement of the pair, as the pound has posted losses against the dollar. A large majority of the open positions in the GBP/USD ratio are short, indicative of a trader bias towards the dollar continuing to post gains.

The pound has lost ground on Wednesday. The pound remains under pressure in the North American session.

 

GBP/USD Fundamentals

  • 8:3o MPC Asset Purchase Facility Votes. Estimate 0-0-9. Actual 0-0-9.
  • 8:3o MPC Official Bank Rate Votes. Estimate 0-0-9. Actual 0-0-9.
  • 8:30 British Public Sector Net Borrowing. Estimate GBP 8.9 billion. Actual GBP 4.9 billion.
  • 10:00 British CBI Industrial Order Expectations. Estimate +7 points. Actual -1 point.
  • 13:45 US Flash Manufacturing PMI. Estimate 56.2 points. Actual 54.4 points.
  • 14:00 US New Home Sales. Estimate 455K. Actual 384K.
  •  14:30 US Crude Oil Inventories. Estimate 2.6M. Actual 3.5M.

*Key releases are highlighted in bold

*All release times are GMT

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April 16, 2014

Japan-US Resume TPP Talks Before Abe US Visit

Trade officials from Japan and the United States resumed talks Tuesday on the thorny issue of tariffs on agricultural produce in the prolonged Trans-Pacific Partnership free trade negotiations.

The discussions are to prepare for bilateral ministerial negotiations on the U.S.-led TPP which a Japanese official said may start Wednesday in Washington in a last-ditch effort to make progress ahead of U.S. President Barack Obama’s visit to Japan next week.

“We’re climbing the mountain little by little” even though a big gap remains, Hiroshi Oe, Japan’s deputy chief TPP negotiator, told reporters following a meeting with Wendy Cutler, acting deputy U.S. trade representative.

The focus in the ongoing negotiations is whether the United States can accept Japan’s desire to keep tariffs on beef and pork as well as four other sensitive farm product categories as an exception under the 12-country TPP.

Based on the outcome of Tuesday’s meeting, Akira Amari, Japanese minister in charge of the TPP, and Michael Froman, U.S. trade representative, will hold talks in the U.S. capital, Oe said.

Oe said the April 24 summit between Japanese Prime Minister Shinzo Abe and Obama in Tokyo should not be regarded as a deadline, but that the two sides have “been holding negotiations in a more intensive manner” based on the leaders’ agreement last month to speed up bilateral TPP talks.

Japan and the United States, the two largest economies in the envisioned TPP pact, have been at odds over tariffs on farm produce and the U.S. call for more access to the Japanese automotive market by lifting nontariff barriers.

The gaps between the countries have been a stumbling block for concluding the deal.

Japan agreed with Australia, another of the 12 TPP negotiating countries, to reduce its tariffs on Australian beef in steps under a bilateral free trade pact in a summit in Tokyo earlier this month.

The other TPP negotiators are Brunei, Canada, Chile, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam.

via Mainichi

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Oil Higher After Ukraine Begins Offensive

Brent crude climbed to $110 a barrel for the first time in six weeks amid concern that the crisis in Ukraine is escalating. West Texas Intermediate advanced before weekly U.S. inventory data.

Futures gained as much as 0.8 percent in London. Ukraine began an offensive against separatists in its restive east, recapturing an airport amid claims that Russian special forces were supporting anti-government groups. U.S. gasoline inventories are predicted to have slid by 1.75 million barrels, extending seven weeks of decreases, according to a Bloomberg survey before government data.

“Oil is being driven more by the Ukraine situation,” Guy Wolf, global head of market analytics at Marex Spectron Group in London, said by e-mail. “Does this situation mean more intense disagreements elsewhere, as in the Cold War? In a tight market, such as WTI, anything can have an amplified effect.”

Brent for June settlement rose 84 cents to $110.20 a barrel on the London-based ICE Futures Europe exchange, rising above $110 for the first time since March 4. The volume of all futures traded was about 12 percent above the 100-day average. Prices fell 0.6 percent this year.

WTI for May delivery gained as much as $1.24 to $104.99 a barrel in electronic trading on the New York Mercantile Exchange, the highest since March 3. The U.S. benchmark grade’s discount to Brent for the same month widened to $6.37 a barrel, the most since April 1 on an intraday basis.

via Bloomberg

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December 12, 2013

Mexico Energy Bill Close to Final Approval

Mexico’s Senate has approved a measure to open the state-run oil fields to foreign investment for the first time in 75 years.

The measure would let private firms explore and extract oil and gas with state-run firm Pemex, and take a share of the profits.

It now moves to the lower house to be voted on, where it is expected to pass.

President Enrique Pena Nieto wrote on Twitter that it was “a significant decision for Mexico”.

Mr Pena Nieto said it was necessary to modernise Mexico’s energy sector and increase oil production, which has dropped from 3.4 million barrels per day in 2004 to the current rate of 2.5 million barrels per day.

However, the left-wing Democratic Revolution Party said it was a submission to US oil companies, and protesters set up camp outside the Senate.

They say the move strikes at the heart of Mexico’s identity.

In 1938, then-president Lazaro Cardenas nationalised the oil industry, which had been operated by foreigners up to that point, asserting that Mexico had a right to its mineral wealth.

If the measure passes Mexico’s Congress, it must then be approved by 17 of the country’s 32 federal entities.

via BBC

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Global Stock Markets Fall on Fed Taper Expectation

Global equities slipped to a one-month low on Thursday after a provisional budget deal in Washington prompted speculation the Federal Reserve policymakers will start trimming its stimulus as early as next week.

“The chances of them doing something next week are certainly rising,” said Paul Kavanagh, a partner at Killik.

U.S. data releases were being watched for clues on the strength of the economy, since greater strength means the Fed can act with less risk of curtailing economic growth. Key releases on Thursday included first-time jobless claims for the week ended December 7 and retail sales for November.

This week’s budget pact eased some of the fiscal drag on the U.S. economy and improved the chances the Fed’s will scale back its bond-buying operations at the December 17-18 meeting. The stimulus program has helped equities to hit multi-year highs.

via Reuters

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US Import Prices Fall With Oil and Food Leading The Way

U.S. import prices fell for a second straight month in November as the cost of petroleum and food dropped, suggesting imported inflation pressures remained subdued.

Import prices fell 0.6 percent last month after a revised 0.6 percent drop in October, the Labor Department said on Thursday. Import prices had previously been reported to have declined 0.7 percent in October.

Economists polled by Reuters had expected import prices would fall 0.6 percent in November. In the 12 months through November, import prices fell 1.5 percent.

Import prices excluding petroleum nudged up 0.1 percent in November after rising by the same margin in October. Compared to November last year, they were down 1.2 percent.

The general lack of inflation pressures is a wild card in the Fed’s decisions on its monetary stimulus.

The Labor Department report also showed export prices ticked up 0.1 percent in November after falling 0.6 percent in October.

via Reuters

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October 15, 2013

Fed Chairman Ben Bernanke has praised Mexico’s central bank for reining in inflation and keeping financial crises at bay

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USD/JPY at 98.40 as U.S. Debt Talks Ease Default Fear

The dollar held firm on Tuesday, hitting a two-week high against the yen as top U.S. senators signalled they could soon reach a bipartisan deal to reopen the government and avert an immediate debt default.

Moves in major currencies were mostly modest, however, as investors remained wary of further political bickering. The exception was the Australian dollar, which jumped to a four-month high, getting an extra lift from meeting minutes showing Australia’s central bank was in no hurry to cut interest rates.

“Excessive pessimism about the U.S. has receded,” said Kyosuke Suzuki, director of forex at Societe Generale. “People have been building dollar long positions, giving consideration to the risk of not having dollars when a deal will eventually be signed.”

Reuters

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U.S. Senate Majority Leader Reid: “We’ve made tremendous progress”

A month of combat in the U.S. Congress over government spending showed signs on Monday of giving way to a Senate deal to reopen shuttered federal agencies and prevent an economically damaging default on federal debt.

Senate Majority Leader Harry Reid, a Democrat, and his Republican counterpart, Mitch McConnell, ended a day of constant talks with optimistic proclamations, as details leaked out of the pact they were negotiating.

“We’ve made tremendous progress,” Reid said at the end of a Senate session during a federal holiday, underscoring the urgency of settling a fiscal crisis that was nearing a Thursday deadline. The U.S. Treasury Department estimates it will reach a $16.7 trillion borrowing limit on Oct. 17.

CNBC

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