Although the downward trend in interest rates continues, Japan, Switzerland, and Europe face limits to monetary easing, and there is a high possibility of currency appreciation pressure [from Mr. Rikio Shima's newsletter]
From the investment e-newsletter Real-time Trade by Riki Shima, provided by GogoJungle, here is a small excerpt from what was distributed today.
Earlier, it was reported that tariffs were postponed with “CHINA STICKING TO SEPTEMBER U.S. TRADE TALKS AFTER TARIFF DELAY,” and there is no change in the plan to visit Washington in September. China will celebrate its 70th founding anniversary on October 1. They probably won’t make any strange concessions before then. Also, outwardly they won’t say anything, but I think the policy is to eliminate Trump from the equation. Unless a substantial concession comes from the United States, negotiations will proceed only with the new president to be decided in November 2020. However, the market will happily entertain expectations and then disappoint itself. For now, it seems to be moving on the expectation of a dramatic deal at the phone talks in two weeks (which is unlikely to happen).
I think the Trump camp wants China to buy a large amount of agricultural products. By doing so, they want to secure support from the Corn Belt. However, for that, China would demand, at a minimum, full recognition of Huawei and then the removal of the existing punitive tariffs. Huawei is a topic the U.S. cannot swallow. Therefore, a breakdown seems inevitable.
I have a long yen position that is being squeezed. It will take time, but I think it will fall again. As a trading rule, you should buy back near the half-point of a rise and cut losses. For example, in USD/JPY (105.07 to 106.97), around 106.00 or just before it; in AUD/JPY (70.90 to 72.90), around 71.90 or just before it. This helps limit large losses. However, in my case, I think I will keep the position.
Today at 11:00, China’s July industrial production and retail sales were published and both significantly undershot expectations.
July industrial production: previous 6.3%, forecast 5.8%, result 4.8%
July retail sales: previous 9.8%, forecast 8.6%, result 7.6%Industrial production grew for the first time in 17 years since 2002, a sign of slowing economy. Therefore, although President Trump whispers to “compromise,” China will not move.
According to Nikkei, India’s new car sales are down about 30% year-on-year, and worldwide car sales are declining, which subtly conveys an economic slowdown.
Former Fed Chair Greenspan told Bloomberg in a phone interview that he would not be surprised if U.S. Treasury yields fall to negative territory, suggesting a continuing global economic slowdown and falling interest rates. In such a climate, with Japan’s and Switzerland/Europe’s limited room for monetary easing, currency appreciation pressures may continue.
“Real-time Real Trade by Riki Shima” (Shima Rikiro)excerpted.
Mr. Shima notes that the U.S.-China trade war will be hard for both sides to compromise on, and the phone talks are likely to end in a breakdown. Nations are easing policy rates, but what other measures will Japan, which has limited options, take beyond monetary easing? (Editorial)
