U.S.-North Korea Summit Day 2!! Focus on Geopolitical Risks ~ Highlights and Schedule for February 28 ~

Yesterday, it was thought that the yen would move weaker as the Bank of Japan was reportedly considering additional easing in April, but due to the India-Pakistan clash, it became a risk-off yen buying scenario. Compared to that, the yen buying strength was stronger, and it fell to around 110.35. However, the risk-off moves were temporary, with the dollar/yen rising, and the comments by Powell, Cohen, and Lighthizer during the U.S. congressional testimony ending without surprises likely provided a tailwind for the dollar/yen.

Nevertheless, one concern is that in some aspects of U.S.-China trade talks, merely increasing import amounts is not enough; there were remarks indicating a need to also address structural reforms and exchange-rate provisions, which is worrisome. The lack of a clear end to U.S.-China trade talks could be a spark for risk-off sentiment.

In the U.K. Parliament, votes on amendments were held; Labour Party amendments were all rejected. In the event of a no-deal Brexit, the rights of EU and UK citizens were approved (which seems obvious to me...). Also, a revision proposal that guarantees a vote if the Brexit deadline is extended to March 14 was approved. It does not seem that Brexit progress is significant. However, the pound is moving as if it anticipates gains.

◎ Today’s Points of Focus

1) U.S.-North Korea Summit

Today includes a one-on-one meeting and a working lunch. A rough schedule is as follows.

11:00 – President Trump and Chairman Kim Jong-un, two-person meeting

11:45 – Meeting including aides

13:55 – Working lunch

16:05Signing ceremony of a joint agreement memorandum by the two leaders

17:50Joint press conference with Trump and Kim

What to pay attention to is the memorandum and the press conference. What will North Korea (Kim Jong-un) and the United States (President Trump) want to include in the memorandum? North Korea seeks removal of economic sanctions or economic aid; the United States seeks de-nuclearization with disclosed nuclear weapons and facilities, or verifiable denuclearization. It will be interesting to see how much can be included.

If it cannot be included, I want to focus on what is said at the joint press conference.

2) European and U.S. Economic Data Releases

Today, important indicators will be released across European countries. Germany, Italy, and France are particularly noteworthy. Recessions or deceleration are a concern. If results come in softer than expected, the euro could weaken again, though even strong results may have limited upside for the euro.

In the United States, GDP will be released. Due to the government shutdown, the GDP figure may diverge from the median forecast. Whether the result is above or below is uncertain, but we should watch the market’s move at the moment of release.

3) Geopolitical Risk and Risk-Off

Headlines, including statements by key figures, deserve attention. Yesterday, headlines about India-Pakistan or U.S.-China trade talks caused rapid moves in the dollar/yen, and there are many factors that can trigger swift moves. Depending on the content, there could be a move like a quick drop and then rebound, as seen yesterday. I will keep an eye on headlines. A sudden drop could be a buying opportunity if possible.

◎ Today’s Event Schedule

February 28 (Thursday)

U.S.-North Korea Summit

09:01 GBP UK GfK Consumer Confidence

10:00 CNY China Manufacturing PMI

10:30 JPY Suzuki Committee Member (BOJ Governor) remarks

11:00 President Trump and Chairman Kim Jong-un two-person meeting

11:45 Meeting including aides

13:55 Working lunch

15:45 CHF Swiss GDP

16:00 GBP Housing Price Index

16:05Signing ceremony of the memorandum by both leaders

16:45 EUR France GDP

17:00 EUR Spain HICP (CPI)

17:30 SEK Sweden GDP

17:50U.S.-North Korea Summit Joint Press Conference

19:00 EUR Italy HICP (CPI)

22:00 EUR Germany HICP (CPI)

22:00 USDClarida, FRB Governor remarks

22:30 USDU.S. GDP

22:30 CAD Current Account

22:50 USD Bositisk Atlanta Fed President remarks

March 1 (Friday)

U.S.-China tariff enforcement deadline

U.S. debt ceiling increase deadline

01:00 USD Harker, Philadelphia Fed President remarks

03:00 USD Kaplan, Dallas Fed President remarks

06:45 NZD Building Consents

07:30 AUD Manufacturing PMI

10:15 USDPowell, Federal Reserve Chair remarks

10:45 CNYCaixin Manufacturing PMI