Archive for Economics & Fundamentals

Israel’s 50-Year Time Bomb

Why Is the Trump Administration Compounding Palestinian Distress?

By Dan Steinbock

In the quest to change Israel’s very nature, the Netanyahu government is pushing Palestinians to an edge – with the support of the Trump White House.

Recently, a report by the International Monetary Fund (IMF) warned that “deepening rifts between key stakeholders and surging violence in Gaza further imperil prospects for peace.” That should not come as a surprise anymore.

While economic and strategic polarization is steadily deepening between Israel and the Palestinians, the “peace initiatives” of the Trump White House are undermining half a century of American diplomacy and pushing the region closer to an abyss.

In the past, the Netanyahu government has vehemently opposed all parallels with South African apartheid. Unfortunately, new data suggests that under apartheid South African blacks had more to hope for than Palestinians today.

Unsettling parallels

Between 1994 and 2017, Israeli GDP per capita, adjusted to purchasing power parity, increased by 150%; in West Bank and Gaza, the comparable figure was 160%. Yet, the Palestinian starting-point is so low that progress in living standards is largely fiction.

In 1994 – amid the peace talks in Oslo – Palestinian living standards were only 6.4% ($1,526) of the Israeli level ($23,693) (Figure a). At the time, the hope was that peace would bring increasing stability, which would foster prosperity and rapid catch-up growth – until the radical-right assassination of Prime Minister Yitzhak Rabin triggered still another cycle of violence.

Last year, Palestinian living standards were about 7.3% ($2,494) of the Israeli level ($34,135). After more than two decades of new wars and friction, terrorism and restrictions, the catch-up has amounted to less than a percentage point.

Let’s set aside political debates about the causes and only focus on economic facts; i.e., changes in income polarization. And let’s compare the last two decades of apartheid South Africa with the past two decades between Israel and Palestinians. In the mid-70s, black South Africans’ annual per capita income relative to white levels was about 8.6%; that is, two percent higher relative to the Palestinian level vis-a-vis the Israelis. By the time apartheid came to an end with the formation of a democratic government in 1994, black South Africans’ per capita income relative to the whites had climbed to some 13%. In contrast, the comparable Palestinian level was half of that figure last year (Figure b).

 

Figure   Unsettling Comparisons

  • GDP Per Capita PPP: Israel Vs West Bank and Gaza (1994-2017)

 

  • Living Standards: Palestinians/Israelis and Black/White South Africans

Source: a. World Bank. b. Palestinians/Israelis: World Bank. Black and White South Africans: OECD.

 

Ironically, South African apartheid was more conducive to economic progress in its last two decades than life in the West Bank and Gaza in the past two decades.

Moreover, the Netanyahu government’s economic policies have also dramatically increased economic polarization in Israel. In the early 1990s, the Gini coefficient, a measure of inequality, was around 35 in Israel, at the level of Portugal and Italy. Closer to 43 today, it is among the highest in OECD countries, and at the level of Nigeria and Zimbabwe. But there may be still worse ahead.

Undermining Israeli Constitution

Protests in Gaza ahead of, and turbulence since Israel’s Independence Day and the relocation of the U.S. embassy to Jerusalem in May, mark the most serious escalation since the 2014 war. With his decision, President Trump departed from the decades-long U.S. executive branch practice not to recognize Israeli sovereignty over any part of Jerusalem.

Meanwhile, a steep decrease in Palestinian Authority and external funding to Gaza since 2017 has worsened already dangerous humanitarian conditions there. According to the World Bank, Gazans’ real per capita incomes have fallen by one-third since 1994, owing largely to the West Bank-Gaza split and to Israel’s and Egypt’s tight controls on goods and people transiting Gaza’s borders.

Instead of seeking to alleviate acute distress in the region, the White House has given de facto support to the new nation-state law, which defines Israel as a Jewish nation-state, despite a significant Arab minority. Unsurprisingly, the new law has been opposed by demonstrations and a high-profile petition by Israeli intellectuals – including Amos Oz, David Grossman, A. B. Yehoshua, Eshkol Nevo, Etgar Keret and Orly Castel-Bloom – who demand the Netanyahu government to abolish it: “The nation-state law, according to which the State of Israel is the national state of the Jews only, expressly permits racial and religious discrimination, nullifies Arabic as an official language alongside Hebrew, does not mention democracy as the foundation of the country and does not mention equality as a basic value.”

In this status quo, Trump’s indiscriminate support for the Netanyahu government effectively nullifies any remaining impression about the U.S. as a “neutral arbiter” in the peace process. What makes the moment even more dangerous is Netanyahu’s inclination to ignore the warnings of Israel’s highest defense authorities, the willingness of the Trump administration to embolden these fatal shifts, and the erosion of any remaining hope on the Palestinian side.

50 years of missed warnings

At the eve of the Yom Kippur War in 1973, when I toured the West Bank and Gaza, what was most striking was the apparent calm on the surface and the lingering tensions behind the official façade. It was this odd mixture of hollow expectations and raw realities that accounted for the nightmares that ensued.

After the Yom Kippur War, the Labor coalition began to expand the boundaries of Jerusalem eastward, which encouraged a group of Messianic settlers to create a foothold in the West Bank, including Ma’ale Adumim by the Gush Emunim which sparked a protest by the “Peace Now” movement. I was there, as was my good friend Amos Oz, the famous Israeli author and one of the leaders of the peace movement. The concern was that if the settlers were permitted to create a substantial de facto presence, it might be legitimized over time with de jure measures, which would undermine Israel’s foundations, polarize the relationship between Israel and the Palestinians, while fostering cycles of terror and conflicts.

Despite a relatively broad popular opposition against the settlements, successive Israeli governments failed to contain them, despite Egyptian President Sadat’s bold peace initiative. Once again, the writing on the wall was ignored and the ‘80s wars in Lebanon ensued, along with the first large-scale Palestinian uprising against Israel in the West Bank and Gaza at the turn of the ‘90s. That’s when the Madrid Conference in 1991 and the subsequent Oslo Accords offered a glimpse of an alternative future scenario – but one that perished after Rabin’s assassination.

Today, half a century has passed from the Six-Day War and the Israeli conquest of the West Bank and Gaza. According to the Peace Index by the Israel Democracy Institute, last July three out of every four Israelis (74%) viewed the chances of Trump’s peace plan being a success as low or very low. According to the most recent survey, 89% of Israeli Jews do not see peace in the horizon. Almost half of Israeli Jews believe the Palestinians should have a state of their own. More think the two-state solution would be impossible to implement. After a generation of increasing bitterness, the share of the skeptics is relatively higher in younger age groups.

The message is fairly clear. Most Israelis believe that President Trump’s initiatives are undermining peace in the region. Most support a two-state plan. But since Washington is not seen as a neutral arbiter, a lasting peace plan is not enforceable.

As the U.S. provides one-third of the annual budget of the UNRWA, the vital relief agency for Palestine refugees since 1948, and has refused to make further contributions, some 5.4 million Palestinian refugees in the West Bank and Gaza, and in Jordan, Lebanon and Syria find themselves in a new situation.

Reportedly, Israel supported only gradual reduction of the UNRWA’s funding and no reductions in Gaza until Netanyahu changed course without consulting his own security officials. Meanwhile, leading Israeli defense authorities have suggested that steep UNRWA cuts could further radicalize Gaza and destabilize the West Bank.

As the IMF data suggests, the status quo is entering an entirely new stage, in which economic agony could result in a failed state before an actual state is formed, while militarization of the crisis and the absence of hope on the Palestinian side could unleash even more desperate waves of terror internationally.

Half a century of policy mistakes should be an adequate warning.

About the Author:

Dan Steinbock is the founder of Difference Group and has served as research director of international business at the India, China and America Institute (US) and a visiting fellow at the Shanghai Institute for International Studies (China) and the EU Center (Singapore). For more, see http://www.differencegroup.net/     

The original commentary was published by the prestigious Consortiumnews on October 16, 2018.

 

Global stocks gripped by risk aversion, China GDP disappoints

Article by ForexTime

It has been a turbulent trading week for stock markets as trade worries, global growth fears, Italian budget concerns and geopolitical tensions led to a deterioration in risk sentiment.

Although global equity bulls made an appearance mid-week thanks to upbeat US corporate earnings, this was short-lived after hawkish Federal Reserve minutes reinforced expectations of higher US interest rates. With geopolitical risks likely to promote risk aversion, investors should fasten their seat belts as global stocks may have more instore for a rough and rocky ride downhill.

Asian shares were mostly mixed this morning after China’s GDP growth for the third quarter of 2018 printed below market expectations. The risk-off vibe from Asian markets could infect European shares this morning and trickle back down into Wall Street later in the afternoon.

China’s GDP slows to 6.5% in Q3

Sentiment towards the world’s second largest economy was dealt a blow this morning following reports that growth slowed to its weakest pace since the global financial crisis during the third quarter.

China’s GDP growth came in at 6.5% in Q3, slower than the 6.7% recorded in Q2 as trade tensions with the United States weighed on the economy. With the growth outlook for China looking discouraging as US tariffs take effect, this is certainly bad news for emerging markets – especially those with a strong economic reliance on the nation. When China sneezes, it is not only emerging markets that will catch a cold but the rest of the world. Further signs of a slowdown in economic momentum is likely to compound risk aversion, ultimately impacting global sentiment.

Turkish Lira star of the show in EM currency space

It has been a positive trading week for the Turkish Lira which has gained 2.88% against the Dollar since Monday. Easing tensions between the United States and Turkey following the release of American pastor Andrew Brunson could be a likely factor behind the Lira’s appreciation. While optimism over the US lifting some sanctions on Tukey is good news for the Lira, the upside remains capped by external factors in the form of Dollar strength and trade tensions. In regards to the technical picture, the USDTYR has the potential to trade towards 5.45 if a weekly close under 5.60 is achieved.

Currency spotlight – EURUSD

The uncertainty revolving around Italy’s controversial budget plans coupled with Brexit developments have weighed heavily on the Euro this week. An appreciating Dollar rubbed salt into the wound with the EURUSD sinking towards 1.1440 on Friday morning. The EURUSD has been on the back foot for the most part of this trading week and is likely to sink lower in the near term if a weekly close below 1.1480 is achieved. Repeated weakness under 1.1480 may open a path towards 1.1420 and 1.1380.

Disclaimer: The content in this article comprises personal opinions and should not be construed as containing personal and/or other investment advice and/or an offer of and/or solicitation for any transactions in financial instruments and/or a guarantee and/or prediction of future performance. ForexTime (FXTM), its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness, of any information or data made available and assume no liability as to any loss arising from any investment based on the same.


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Chile raises rate 25 bps so inflation stays around target

By CentralBankNews.info
     Chile’s central bank raised its monetary policy rate by 25 basis points to 2.75 percent, saying the “board believes that the monetary stimulus should begin to be reduced to ensure that inflation perspectives remain close to the target.”
      It is the first rate hike by the Central Bank of Chile since December 2015 when the rate was raised to 3.50 percent to rein in inflation, boosted by the fall in the peso’s exchange rate.
      Beginning in January 2017 the central bank then began cutting the rate as inflation eased and in four quick steps it sliced 100 basis points of the key rate, wrapping up its easing cycle by May 2017.
      Since then the rate has been kept stable but beginning in June the board has been considering withdrawing monetary stimulus. Minutes from the September meeting showed committee members had considered raising the rate before deciding unanimously to maintain it.
      Today’s decision, which was unanimous by the board, reflected the recent narrowing of the output gaps in recent quarters and the expectation that this will continue so inflation will be around 3.0 percent in coming quarters, the bank’s target.
      The central bank said it expects the monetary policy rate to converge to its neutral level by 2020 and beginning this process in a timely manner would allow a tightening to be gradual and cautious.
      Chile’s inflation rate rose to 3.1 percent in September from 2.6 percent in August, with investment in machinery and equipment continuing to boost domestic spending, with durable consumption also strong.
       Business expectations are also optimistic while household expectations have ease in recent months and are below their neutral threshold, the central bank said.
       Chile’s peso firmed steadily for two years beginning in January 2016 but since February this year it has depreciated, like most emerging market currencies.
       In the last week the peso has risen as investors looked for tighter monetary policy and today the peso was trading at 676.2 to the U.S. dollar, down almost 9 percent this year.

   
     The Central Bank of Chile issued the following press release:

“In its monetary policy meeting, the Board of the Central Bank of Chile decided to raise the monetary policy interest rate by 25 basis points to 2.75%. The decision was adopted by the unanimous vote of its members.
The external scenario continues to be characterized by financial markets’ volatility, in a context of increasing divergence of the US economy from its peers in the developed world. At the same time, trade tensions have tended to focus on US-China relations. The Federal Reserve raised its benchmark rate again in September, while the market adjusted upward the expected trajectory for 2019 and 2020. This pushed long-term interest rates and risk aversion up in most of the countries, and the prices of riskier assets saw important corrections at the global level. In the Eurozone, Brexit negotiations and the definition of Italy’s fiscal deficit have created uncertainty in markets. In turn, China increased the monetary impulse once more, while its currency continued to depreciate against the dollar. Financial pressures on the rest of the emerging economies have tended to moderate. Commodity prices, although with important ups and downs, have seen increases in most products, copper included.

Chile’s currency and stock prices, as in most emerging economies, saw significant fluctuations in recent weeks. In the domestic fixed-income market, worth noting was the rise of short-term rates in line with expectations about the MPR. Meanwhile, longterm rates have had limited increases, smaller than those of their external peers, in a context where the country’s financial risk indicators remained contained. Domestic credit continues to be characterized by low interest rates and stronger growth in commercial loans. The Bank Credit Survey for the third quarter of 2018 showed less restrictions for granting loans to households and big companies and stronger demand in the different segments, especially households, big companies and real estate.

Mining activity had some setbacks owing to some specific factors in some mines. The other sectors evolved as foreseen in the September Monetary Policy Report. Investment, especially in machinery and equipment, continues to lead the increase in domestic spending. The good performance of durable consumption also stands out. The review of complementary sources of information on the labor market -including administrative records- indicates increased dynamism of employment and salaries than suggested by the surveys. Corporate expectations (IMCE) are still in the optimistic zone, while household expectations (IPEC) have relapsed somewhat in recent months and now stand slightly below their neutral threshold. Anyway, expectations about the economic situation of households one year ahead are still positive. For the period 2018-2020, the markets’ outlook for GDP growth (EES) is consistent with the baseline scenario of the latest Report.

September’s inflation (0.3%) was slightly below projections, affected by one-off developments, such as lower food inflation. With this, annual CPI inflation rose to 3.1% and CPIEFE inflation rose to 2.1%, with a sustained acceleration of the more outputgap sensitive prices, such as the non-regulated services in the CPIEFE basket. Private expectations for inflation remain around 3% for December of this year and for one and two years ahead.

The Board’s decision considered that capacity gaps have narrowed in recent quarters and will continue to do so in line with forecasts in the Monetary Policy Report, taking both headline and core inflation near 3% in the coming quarters. In this scenario, the Board believes that the monetary stimulus should begin to be reduced to ensure that inflation perspectives remain close to the target. Bearing in mind that, in the baseline scenario of the Report, the monetary policy rate will converge to its neutral level in 2020, a timely start of this process allows proceeding with graduality and caution. This will provide the necessary room for the Board to define the appropriate pace of the monetary stimulus withdrawal. Thus, the Board reaffirms its commitment to conduct monetary policy with flexibility, so that projected inflation stands at 3% over the twoyear horizon.

The minutes of this Monetary Policy Meeting will be published at 8:30 hours of Tuesday 6 November 2018. The next Monetary Policy Meeting is scheduled to take place on Tuesday 4 December 2018 and the statement thereof will be released the same day at 18:00 hours. “

     www.CentralBankNews.info

Sterling turns blind eye to weak UK retail sales

Article by ForexTime

The fairly muted response in the British Pound to the disappointing retail sales data for September reaffirms once again that Brexit headlines take precedence over domestic economic fundamentals for currency volatility.

Retail sales tumbled sharply last month, printing well below market expectations at -0.8% thanks to a large fall of 1.5% in food sales. While under normal circumstance today’s discouraging report would have translated to Pound weakness, price action suggests that investors are preoccupied with Brexit talks.

Market players expecting fireworks from the dubbed “moment of truth” were left empty-handed after the first day of the EU summit concluded with Theresa May offering “nothing new” to EU27 leaders. European leaders unsurprisingly ended up dropping plans for a November summit due to the lack of progress in negotiations, with Theresa May receiving headline attention by indicating that she was “ready to consider” extending the transition out of the EU beyond 2020.

Extending the UK’s transition out of the EU to beyond 2020 is not necessarily a market-friendly outcome even if it provides some more time for EU and UK leaders to reach some sort of breakthrough. It essentially highlights to investors that negotiations over Brexit remain largely in deadlock and the Irish border issue remains a major obstacle and this is unlikely to change.

In regards to the technical picture, the GBPUSD has staged a minor rebound from the 1.3080 region with prices trading marginally above 1.3120 as of writing. The volatile price action seen this week does highlight once again that the Pound remains heavily influenced by Brexit headlines.

A failure of the GBPUSD to keep above 1.3100 before the close of the week will run the risk of traders once again selling the Pound at higher levels. Another return to 1.3050 over the coming days can’t be ruled out if traders show impatience with Brexit progress.

Dollar Index lifted higher by Fed minutes, 95.80 in sight

Investor sentiment towards the Greenback has brightened after minutes from the Federal Reserve’s latest policy meeting cemented expectations of higher U.S. interest rates.

One of the most interesting takeaways from minutes recently released by the Federal Open Market Committee (FOMC) is a suggestion from the Federal Reserve that it could raise interest rates beyond market expectations. This would of course come across as disappointing to President Trump, but would also be considered as positive news for Dollar buyers as it stresses the Federal Reserve is completely independent from the Whitehouse.

Any near-term weakness in the Dollar index will likely be due to profit-taking, but the optimistic outlook from the Federal Reserve regarding higher U.S. interest rates is seen as long-term supportive of the USD.

The overall bullish sentiment towards the U.S. economy and prospects of higher U.S. interest rates are magnetizing investors towards the Dollar, and will present a threat to emerging markets concerned over capital outflows.

Commodity spotlight – Gold

Those who might have expected Gold to fall heavily following the release of the  FOMC minutes have been left surprised by the resilience of the yellow metal. External uncertainties and the continued mixed investor sentiment towards stock markets is probably encouraging traders to hang onto Gold positions for now.

Gold also remains supported from a technical perspective, with the metal bullish on the Daily timeframe above $1,213. If investors are able to push prices above $1,225 it is possible that Gold could climb to $1,233 over the coming sessions.

Disclaimer: The content in this article comprises personal opinions and should not be construed as containing personal and/or other investment advice and/or an offer of and/or solicitation for any transactions in financial instruments and/or a guarantee and/or prediction of future performance. ForexTime (FXTM), its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness, of any information or data made available and assume no liability as to any loss arising from any investment based on the same.


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The Yen is changing direction again. Overview for 18.10.2018

Article By RoboForex.com

On Thursday morning, USDJPY is trading downwards; investors need “safe haven” assets again.

The Japanese yen is getting stronger against the USD on Thursday morning. The current quote for the instrument is 112.50.

Japan published several macroeconomic reports today, which may seem really interesting. The Import added 7.0% y/y in September after expanding by 15.3% y/y the month before. The Export dropped 1.2% y/y after increasing by 6.6% y/y in August and against the expected reading of +1.9% y/y. This is the first time the indicator has fallen since November 2016.

The current decline may indicate the same for the Japanese GDP in the third quarter.

The components of the report show that vehicles export to the USA lost 7.0% y/y. In general, sales from Japan to the USA decreased by 0.2% y/y due to drops in transport equipment, motor vehicles, and scientific and optical instruments.

The USA are still monitoring Japan due to the absence of trade agreement between two countries. Earlier, the USA representatives said that the Japanese market was very important, but not efficient for the American export. The USA still haven’t decided on increasing import duties for Japanese goods, but there is a possible scenario, which implies that the US government might do the same as they did to China.

Article By RoboForex.com

Attention!
Forecasts presented in this section only reflect the author’s private opinion and should not be considered as guidance for trading. RoboForex LP bears no responsibility for trading results based on trading recommendations described in these analytical reviews.

Dollar lifted by hawkish Fed minutes

Article by ForexTime

Dollar bulls were back in action on Wednesday evening after minutes from the Federal Reserve’s September meeting reinforced expectations of higher US interest rates.

Policymakers at the Federal Reserve voted unanimously to raising interest rates last month and generally agreed to move ahead with further increases. Fed officials expressed optimism over the strength of the US economy, and felt further rate hikes “would most likely be consistent” with rising inflation and historically low unemployment. However, some members warned that instability in emerging markets and ongoing trade disputes posed a threat to the global economy. With the central bank expected to raise interest rates again in December and three more times next year, the outlook for the Dollar points to further upside. An interesting takeaway was the fact that US president Donald Trump’s comments were not mentioned in the minutes. This could be based on Trump’s repeated criticism having little to no impact on the central bank’s interest hiking path.

Taking a look at the technical picture, the Dollar Index rallied to a one-week high above 95.60 following the hawkish Fed minutes. A solid daily close above the 95.50 level is likely to signal the return of bulls with 96.00 and 96.20 acting as levels of interest. A failure of prices to keep above 95.50 may trigger a move back to 95.10.

Sterling weakens as EU summit gets underway 

The first day of the EU summit concluded with “very good progress” on Brexit, according to Theresa May with EU leaders dropping plans for a November summit.

While this development has provided more time for the EU and UK to negotiate further, the impasse over the Northern Irish border remains a major deal breaker. Away from Brexit, investors will direct their attention towards the pending retail sales figure for September which is expected to dip -0.3% MoM.

Focusing on the technical perspective, the GBPUSD is struggling to keep above the 1.3100 level as of writing. The explosive price action witnessed this week continues to highlight how the Pound remains highly sensitive to Brexit developments. A decisive breakdown and daily close below 1.3100 could send the GBPUSD towards 1.3050 in the near term.

Disclaimer: The content in this article comprises personal opinions and should not be construed as containing personal and/or other investment advice and/or an offer of and/or solicitation for any transactions in financial instruments and/or a guarantee and/or prediction of future performance. ForexTime (FXTM), its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness, of any information or data made available and assume no liability as to any loss arising from any investment based on the same.


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South Korea maintains rate as growth forecast lowered

By CentralBankNews.info
      South Korea’s central bank left its base rate steady at 1.50 percent, as expected, and said it would maintain its accommodative monetary policy stance as inflationary pressures from demand are not high and economic growth is below expectations.
     The Bank of Korea (BOK), which in November last year raised its rate for the first time since June 2011, repeated its guidance from August that it would continue to “judge whether it is necessary to adjust its accommodative monetary policy stance, while closely checking future economic growth and inflation trends.”
      While most analysts had expected the BOK to retain its base rate today, many were expecting the central bank to signal that it may raise its rate in November as inflation picked up speed in September.            
     But economic growth in export-dependent South Korea is expected to be weaker than forecast in July with employment conditions sluggish and investment expected to slow while exports should sustain their momentum due to the continued buoyancy of the global economy.
     However, BOK cautioned global growth is likely to be affected by spreading trade protectionism, the normalization of monetary policy in advanced economies and U.S. economic policy.
      “Going forward the Board expects domestic economic growth to be somewhat below the path projected in July, but to sustain a rate that does not diverge significantly from its potential level,” the BOK said.
    South Korea’s gross domestic product has expanded 2.8 year-on-year in the last three quarters but in an update to its economic outlook it lowered the forecast for growth this year to 2.7 percent from the July forecast of 2.9 percent.
     Next year the economy is also forecast to expand by 2.7 percent.
     Inflation rose to 1.9 percent in September from 1.4 percent in August due to higher agricultural prices and the ending of a temporary cut in electricity fees.
     On average BOK forecast inflation of 1.6 percent this year and 1.7 percent in 2019, below its 2.0 percent target.

      The Bank of Korea issued the following statement:
     

“The Monetary Policy Board of the Bank of Korea decided today to leave the Base Rate unchanged at 1.50% for the intermeeting period.
Based on currently available information the Board considers that the global economy has continued its sound growth. The global financial markets have shown increased volatility, with government bond yields rising and stock prices falling in major countries. Looking ahead the Board sees global economic growth as likely to be affected by factors such as the movements toward spreading trade protectionism, the paces of monetary policy normalization in major countries, and the directions of the US government’s economic policies.
The Board judges that the domestic economy has sustained a rate of growth at its potential level generally, as consumption and exports have shown favorable movements although the adjustments in facilities and construction investment have persisted. Employment conditions have remained sluggish, with the number of persons employed having risen only slightly. Going forward the Board expects domestic economic growth to be somewhat below the path projected in July, but to sustain a rate that does not diverge significantly from its potential level. It anticipates that investment will slow but that the trend of steady increase in consumption will continue, and that exports will also sustain their favorable movements thanks to the buoyancy of the global economy.
Consumer price inflation has risen to the upper-1% level, due mainly to an acceleration in the pace of increase in agricultural product prices and to the ending of a temporary reduction of electricity fees. Core inflation (with food and energy product prices excluded from the CPI) has remained at the 1% level, and the rate of inflation expected by the general public has been in the mid- to upper-2% range. Looking ahead it is forecast that consumer price inflation will fluctuate in the mid- to upper-1% range. Core inflation will also gradually rise.
In the domestic financial markets, stock prices have fallen significantly and the Korean won-US dollar exchange rate has risen to a considerable extent, in line mainly with the escalation of the US-China trade dispute and the rapid decline in stock prices globally. Long-term market interest rates have increased, in reflection of the changes in interest rates in major countries. Household lending has sustained its higher rate of expansion than in past years, although the amount of its expansion has lessened somewhat. Housing sales prices had risen substantially in some parts of Seoul and its surrounding areas, but their pace of increase has slowed since the Korean governments announcement of measures to stabilize the housing market.
Looking ahead, the Board will conduct monetary policy so as to ensure that the recovery of economic growth continues and consumer price inflation can be stabilized at the target level over a medium-term horizon, while paying attention to financial stability. As it is forecast that inflationary pressures on the demand side will not be high for the time being, and that the domestic economy will sustain a rate of growth that does not diverge significantly from its potential level, the Board will maintain its accommodative monetary policy stance. In this process it will judge whether it is necessary to adjust its accommodative monetary policy stance, while closely checking future economic growth and inflation trends. It will also carefully monitor conditions related to trade with major countries, any changes in the monetary policies of major countries, financial and economic conditions in emerging market economies, the trend of increase in household debt, and geopolitical risks.”

      www.CentralBankNews.info


Pound shaky ahead of EU Summit, FOMC minutes in focus

Article by ForexTime

Stocks in Asia were broadly higher today after upbeat U.S. corporate earnings and encouraging economic data elevated Wall Street overnight.

Some semblance of stability is likely to return to financial markets this week as earnings season offers investors a short-term distraction away from trade tensions and global growth fears. Although robust earnings are poised to instil equity bulls with a renewed sense of confidence, the underlying factors weighing on stock markets remain present. With U.S.-China trade disputes, concerns over plateauing global growth, Brexit-related uncertainty, geopolitical tensions and prospects of higher U.S. interest rates still in the mix, equity bears have plenty of ammunition.

European Union summit in focus

With just over five months left until the official Brexit deadline, markets and investors are still scrambling for clarity with many questions still unanswered.

Over the next few days investors will be keeping a very close eye on the EU summit which could provide some direction on Brexit. With a deadlock on the Northern Irish border issue seen as a major obstacle in Brexit talks, there is little hope for a breakthrough at the EU summit. If the summit concludes with no real progress made on negations, this simply raises the risk of a no-deal Brexit outcome. Given the Pound is extremely sensitive to Brexit headlines, such a scenario could send the currency collapsing like a house of cards.

Dollar gains ahead of Fed minutes

Buying sentiment towards the Dollar took a slight hit on Tuesday after Donald Trump once again criticised the Federal Reserve, stating that it was his ‘biggest threat’ because it is raising rates too fast. However, the Dollar’s downside was limited by positive U.S. industrial production figures which boosted sentiment towards the U.S. economy. Although Trump’s repeated criticism of the Fed is unlikely to impact the central bank’s interest rate hiking path, it could continue weighing on the Dollar.

Today’s main event risk for the Dollar will be the Federal Open Market Committee meeting minutes which investors will closely comb through for clues on rate hike timings beyond December. The Dollar could be given an opportunity to rebound if the minutes come across as more hawkish than expected.

The Dollar Index has staged an impressive rebound from the 94.80 level with prices trading towards 95.20 as of writing. Bears need to break below the 95.00 support level for prices to sink towards 94.60. Alternatively, an intraday breakout above 95.30 could trigger a move higher to 95.44.

Commodity spotlight – Oil

Oil prices seem to be witnessing some stability as U.S.-Saudi tensions ease with investors redirecting their focus towards looming sanctions against Iran and a surprise decline in U.S. Crude inventories.

U.S. sanctions against Iran’s oil exports and falling production from Venezuela are two likely factors to push oil prices higher this quarter. Geopolitical risk factors may spark uncertainty over the global supply outlook – ultimately fanning fears of possible supply shocks. Although the current market conditions favour higher oil prices, global trade tensions still remain a threat to oil bulls down the road. Heightened trade disputes between the world’s two largest economies represent a threat to global growth. Slowing global growth in the event of a full-blown trade war will most likely dent demand for crude.

Disclaimer: The content in this article comprises personal opinions and should not be construed as containing personal and/or other investment advice and/or an offer of and/or solicitation for any transactions in financial instruments and/or a guarantee and/or prediction of future performance. ForexTime (FXTM), its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness, of any information or data made available and assume no liability as to any loss arising from any investment based on the same.


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Calm returns to markets….but for how long?

Article by ForexTime

A semblance of stability is returning to financial markets as investors sweep aside trade disputes and global growth fears to focus on the US earnings season.

The overall market mood seems to be improving amid easing US-Saudi tensions and this continues to be reflected across global equity markets. Asian shares concluded Tuesday’s trading session on a positive note amid the rebound in risk sentiment while European stocks followed a similar pattern. Wall Street rallied as strong earnings from financial and healthcare companies boosted investor confidence with the Dow Jones jumping more than 500 points.

Although robust corporate earnings are likely to inject equity bulls with a renewed sense of confidence, the question is for how long? With the various fundamental themes weighing heavily on global stocks still present, it is too early to rule out further declines in the future.

Emerging market currencies fight back 

Emerging market currencies are holding their ground against the Dollar with the Turkish Lira, South African Rand and Argentine Peso among many others venturing higher.

The near-term outlook for EM currencies could be positive if risk sentiment continues to improve and the Dollar weakens further. In China, the Yuan is struggling for direction against the Dollar with the USDCNY trading around 6.9100 as of writing. Technical traders will continue to closely observe how prices react around the 6.9000 level. A break below this region may open the gates towards 6.8870.

Currency spotlight – EURUSD 

The EURUSD slammed into a brick wall in the form of 1.1620 on Tuesday before later sinking back towards 1.1575.

Although the technical picture on the currency pair remains somewhat bearish, the trend could shift if a daily close above 1.1620 is achieved. If bulls are able to conquer 1.1620, the next key levels of interest will be found at and 1.1670 and 1.1730. Alternatively, a breakdown below 1.1550 is likely to inspire a decline back towards 1.1450.

 

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The Australian Dollar is trading under pressure. Overview for 16.10.2018

Article By RoboForex.com

On Tuesday, AUDUSD is moving downwards influenced by the active USD and the Monetary Policy Meeting Minutes published by the RBA.

The Australian Dollar started today’s trading session by falling against the USD. The current quote for the instrument is 0.7122.

The Monetary Policy Meeting Minutes published by the RBA today says that the AUD rate decline that started earlier is good for the country’s domestic economy. It is quite interesting, because the regulator doesn’t mention the importance of the Aussie rate at every meeting, unlike it did in the past.

According to the RBA, the next revision of the key rate is likely to be upwards, but surely not in the nearest future. At the same time, the regulator is still pretty sure (as it was in the past) that keeping the rate intact for long period of time provides additional stability and confidence to the country’s economy.

Another thing the RBA mentioned was low mortgage rates at the moment.

In addition to that, the RBA’s attention was focused on uncertainty with consumption, which is connected to slight reduction of wage growth and decline of housing prices. The employment is feeling good after the labor market skyrocketed in August. However, it was said that an average income amount was still not enough for the regulator to feel safe.

Article By RoboForex.com

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