All eyes on the Bank’s response to the threat of a disorderly Brexit

Mark Carney will give evidence to the Commons Treasury committee this week and even someone who struggles to know their John Maynard Keynes from their Milton Friedman can guess what will be top of the agenda. MPs will want to know how the Bank of England plans to respond if the result of voting down the withdrawal agreement negotiated by Theresa May is that the UK leaves the EU next spring in a disorderly way. Things have moved on since Carney last held forth about Brexit at the Bank’s inflation report press conference this month. On that occasion, the governor said he was still expecting a deal but in the absence of one it should not be assumed that interest rates would be cut. Indeed, the likely inflationary consequences of a falling pound might mean borrowing costs would need to rise. Read More @

Yuan Exposed to Vanishing U.S.-China Yield Gap as Much as Trade

The yuan could face more weakness and not only because of rising trade tensions between China and the U.S., or currency manipulation. For the first time in at least a decade, one-year Treasuries yield more than short-term Chinese debt, and BMO Capital Markets says that spells trouble for China’s currency. A relentless slump in 12-month Treasury bills has pushed the yield to 2.66 percent, edging above the 2.56 percent yield on similar-maturity Chinese securities for the first time since at least 2008. At the start of 2018, the Chinese securities yielded about 200 basis points more than the T-bills. Diverging monetary policy on the part of the Federal Reserve and the People’s Bank of China should keep that gap growing, leaving the yuan vulnerable, according to BMO. Markets expect U.S. policy makers to raise rates for a fourth time this year in December, while the PBOC eases policy to help a slowing economy. Read More @


USD stays strong after a good pullback. FED unlikely the raise rate this December rumours is also dragging the USD lower. We maintain that the demand of the USD will be back as the US economy as at all time great economy thus far.


  1. 3.00pm – Germany will release their PPI – It’s a leading indicator of consumer inflation – when manufacturers charge more for goods the higher costs are usually passed on to the consumer.
  2. 4.20pm – RBA will Lowe speaks – AUD volatility expected.
  3. 6.00pm – UK will release their Inflation report hearings – volatility expected.
  4. 9.30pm – US will release their Building Permits – It’s an excellent gauge of future construction activity because obtaining a permit is among the first steps in constructing a new building.
  5. 11.00pm – EURO volatility expected when German Weidmann speaks.

The market is now looking for a catalyst and fresh news; USD remains in demand and anything can happen moving forward. We remain cautious.

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