Relations with China are a focus material! "Key points for May 14 and the event schedule"
Yesterday, attention was focused on Powell's remarks as FRB Chair, and when he mentioned economic deterioration, dollar selling progressed, but after he denied negative interest rates, the dollar reversed to buy and rose significantly.
For the time being, it seems that there will be continued focus on the introduction of negative interest rates by the FRB.
President Trump has been calling for the introduction of negative interest rates on Twitter, so all eyes are on how things will move from here.
Last year, when he pressed for a rate cut and the FRB denied it, tariffs on China were announced, stock prices fell, and ultimately a rate cut occurred.
Even if Chair Powell denies negative rates this time, I have a feeling President Trump will push for their introduction through some form of pressure.
◎ Today’s Points of Focus
1) China
China is considering retaliatory measures targeting Americans, and has shown a confrontational stance by delaying purchases of US agricultural products due to a tense atmosphere.
Moreover, Chinese government ships and the Chinese military are sailing around Senkaku Islands, the Japan Sea, and the Spratly Islands to assert effective control.
In response, the United States is stopping investments in China and extending presidential orders banning the use of supplies for telecommunications networks around Huawei, tightening sanctions.
They are also criticizing the WHO for concealing information about Taiwan.
Taiwan is urging countries to participate in WHO meetings as observers.
Australia is calling for talks on trade with China, but so far there has been no response from the Chinese side.
In Europe and Britain, there are moves to hold China responsible for the coronavirus, and the anti-China encirclement seems to be widening.
Clearly, China is not likely to stay silent and will probably take some action.
With COVID-19 settling down and risk-off fading, the next risk-off factor looks likely to be China-focused, so this warrants close attention.
2) Australia Employment
Australia's employment statistics are released today, with particular attention on the unemployment rate.
In the recent RBA meeting, the unemployment rate was discussed and appears to significantly influence policy decisions.
Unemployment rate forecast is 8.3%
Whether it will rise above or fall below this, stay tuned.
3) Rate Cuts, Negative Rates, and Additional Easing
In today’s Mexico policy rate announcement, a rate cut is expected, and further Mexican peso selling is anticipated to intensify.
The peso has been weakening, so caution is advised.
Also, the NZ middle-of-the-road central bank yesterday did not deny negative rates and announced additional easing; expectations are growing that negative rates may come within the year.
Although Powell denied negative rates in the United States, markets are beginning to price in negative-rate expectations.
In Britain yesterday, some reports cited Governor Bailey as mentioning additional easing.
With speeches scheduled today, it will be interesting to see how Governor Bailey discusses additional easing.
Countries that may implement further easing measures deserve close attention.
◎ Today’s Event Schedule
May 14 (Thursday)
10:30 AUDAustralia Employment Change and Unemployment Rate
15:00 EUR Germany HICP (Consumer Price Index)
16:00 EUR Spain HICP (Consumer Price Index)
16:00 TRY Turkish Retail Sales
19:30 GBPBoE Governor Bailey Speech
21:30 USD Initial Jobless Claims
May 15 (Friday)
00:15 CADPoloz Bank of Canada Governor Speech
03:00 MXNMexico Policy Rate Announcement
07:30 NZD New Zealand Manufacturing PMI
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