Brexit: Deutsche Bank still sees 50% chance of no-deal by year-end

LONDON (Reuters) – Deutsche Bank (DE:) said on Wednesday it still sees a 50% chance that Britain will leave the European Union without a deal by the end of the year following a general election, but said there’s a 20% chance of a “surprise” agreement later this month.

It gave a 40% chance of a caretaker government being formed and a general election taking place.

Out of the two possible scenarios following that, the bank has a 25% probability of either an orderly Brexit, a second referendum or scrapping of Brexit altogether.

The alternative scenario, with a 15% chance, would be a no-deal Brexit resulting from the general election.

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.

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Ex-Fed Official Takes Aim at Bank of England’s Crypto Proposal

(Bloomberg) — Bank of England Governor Mark Carney’s plan to end the dollar’s dominance in the global financial system ignores the benefits of having the greenback as a reserve currency, according to former senior Federal Reserve official Simon Potter.

The dollar should eventually be replaced by something like Facebook Inc (NASDAQ:).’s proposed Libra cryptocurrency, Carney said last month. While the Bank of England chief bemoaned the greenback’s “domineering influence” on trade, he failed to take into account how the dollar’s status has benefited other countries, Potter said at a Peterson Institute for International Economics event in New York on Wednesday.

“I see no argument that makes sense to have something that complicated out there when you have large, liquid capital markets in the U.S.,” Potter, who ran the New York Fed’s trading desk, said in his first public remarks since departing in June. “Not having one currency that you can basically price things and have a deep market in, that makes life much harder for the global economy.”

The dollar’s role in the global financial system is vast: other countries use it to pay international debts, and it commands the lion’s share of central banks’ foreign-exchange reserves. That status has afforded the U.S. several advantages: foreign investors have flocked to dollar-denominated assets, helping America keep a lid on its borrowing costs.

Carney and Potter do see eye-to-eye on one point: policy makers should keep control of the currency system. While Facebook’s Libra could lie outside the purview of central banks, Carney argued in August that the public sector would be the best provider of a new currency hegemony.

Potter agrees. While it’s unlikely that “individual sovereigns could ever coordinate” around a virtual currency, the risk is that companies might.

“Central banks should be very concerned about the private sector doing this,” Potter said. A nation’s control of its currency “is designed to protect people and get good outcomes. The private sector is much more interested in selling products.”

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.

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PBOC Drains $20.5 Billion in Bank Liquidity, Keeps Rates on Hold

© Reuters.  PBOC Drains $  20.5 Billion in Bank Liquidity, Keeps Rates on Hold © Reuters. PBOC Drains $ 20.5 Billion in Bank Liquidity, Keeps Rates on Hold

(Bloomberg) — The People’s Bank of China drained liquidity from the financial system, signaling that officials remain cautious about drastically stepping up the scope of stimulus even after a slew of weak economic data.

The People’s Bank of China injected 200 billion yuan ($ 28.3 billion) through the medium-term lending facility while 265 billion yuan worth matured. The one-year funding was offered at 3.3%, according to a statement, unchanged from before. The central bank also let 80 billion yuan worth of 7-day reverse repurchase agreements mature, taking the total net withdrawal to 145 billion .

Tuesday’s operation will offset some of the easing effects of the cuts to bank’ announced earlier in September. Even so, top officials are increasingly worried about economic growth, and more government debt sales are in the stimulus pipeline.

A growing number of economists have cut their forecasts for gross domestic product growth in 2020 to below 6%, and the economy continued to slow in August, official data on Monday showed.

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.

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Take some time to read Central Bank statements

A wealth of information 

A wealth of information 

It is always worth having a look through central banks minutes as they are often helpful in providing background information or a general overview on the present market conditions. I recommend beginner traders taking some time to do this as it starts to key them in with the major market themes. So, as an example, one question that the RBNZ answeredin their last policy statement was, ‘How are weaker global conditions affecting New Zealand’s economy?’ The following answers, and more, were given by the RBNZ to the question above:

  1. New Zealand is a ‘small open economy, so global economy and financial market conditions have a large influence on our business cycle’.
  2. The RBNZ’s domestic forecasts are based on the channels which impact the NZ economy and the highest levels are, ‘trade, financial markets and confidence business/uncertainty’
  3. Weaker global conditions often lead to lower prices for NZ exports, imports and reduced tourist spending.

These minutes were enough to give a clue as to the importance of the business confidence data coming up on Thursday. So, always worth reading the minutes through from time to time.

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Argentine peso falls again, central bank sells $170 million

2/2 © Reuters. FILE PHOTO: A man shows Argentine pesos outside a bank in Buenos Aires' financial district © Reuters. FILE PHOTO: A man shows Argentine pesos outside a bank in Buenos Aires’ financial district 2/2

By Walter Bianchi and Jorge Otaola

BUENOS AIRES (Reuters) – Argentina’s peso currency traded 2.85% weaker at 57.95 per U.S. dollar on Wednesday, cutting what had been steeper losses early in the day as the central bank sold $ 170 million of its reserves in three interventions aimed at controlling the peso’s fall.

Worries about Argentina’s ability to meet its dollar-denominated debt obligations have increased since the peso got trounced by political uncertainty after an Aug. 11 primary election. The peso has lost 21.78% of its value against the U.S. dollar since Aug. 12.

The central bank issued a press release saying it would limit financing in pesos for major exporters, a move aimed at strengthening the local currency by encouraging companies to sell dollars in order to obtain pesos needed to fund operations.

Country risk 11EMJ> rose 136 basis points to 2,126, its highest level in 14 years, according to the JP Morgan Emerging Markets Bond Index Plus.

Argentina’s central bank sold $ 50 million of its reserves in its first dollar auction of the day at an average 58.833 pesos per dollar, as part of its effort to control the peso’s fall.

Minutes later the bank sold $ 65 million more of its reserves at an average 58.7269 pesos per dollar, traders said. The bank quickly followed up with a third auction, selling $ 55 million at an average 58.2354.

On Tuesday, the bank exceeded for the first time a guideline on reserve sales agreed as part of its $ 57 billion standby deal with the International Monetary Fund, selling $ 302 million in the foreign exchange market.

The agreement with the IMF limits Argentina’s central bank to $ 250 million in reserve sales daily, set when the exchange rate was above 51.5 pesos per dollar, with the option to intervene further to “counteract episodes of excessive volatility.”

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.

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Exclusive: China central bank official says yuan at right level, disorderly capital flows unlikely

© Reuters. FILE PHOTO: Man sits in front of the headquarters of the People's Bank of China, the central bank, in Beijing © Reuters. FILE PHOTO: Man sits in front of the headquarters of the People’s Bank of China, the central bank, in Beijing

By Kevin Yao and Ryan Woo

BEIJING (Reuters) – China’s yuan is at an appropriate level currently and two-way fluctuations in the currency will not necessarily cause disorderly capital flows, a senior official at the People’s Bank of China told Reuters on Tuesday.

The yuan has weakened nearly 2.4% since U.S. President Donald Trump threatened early this month to impose more tariffs on Chinese goods from Sept. 1, though there are signs China is trying to stem the declines.

“The current level of exchange rate is appropriately aligned with fundamentals of China’s economy and market supply and demand,” Zhu Jun, head of the central bank’s international department, said in an interview with Reuters.

Zhu said China was “shocked” by the U.S. Treasury Department’s move last week to label China a currency manipulator, hours after Beijing let the yuan slide past the key 7-per dollar level to its lowest level since the global crisis.

But Zhu asserted that China will be able to “navigate all scenarios” arising from the Trump administration’s decision to label it a currency manipulator for the first time since 1994, which rattled global markets.

China is unlikely to face serious consequences from getting that label given the apparent lack of Group of Seven and International Monetary Fund support for Washington’s move, former and current U.S. and G7 officials said.

But some Chinese advisers and former officials have sounded alarm bells over a possible wider conflict between China and the United States. The year-long trade war between the world’s two largest economies has already spread beyond tit-for-tat tariffs on goods to other areas such as technology and currency.

UPGRADING THE TRADE WAR?

The real aim of the U.S. currency manipulator label is to disrupt China’s financial markets and its economy, said Chen , former chairman of the China Development Bank – the country’s biggest policy bank.

“The U.S. step to list China as a currency manipulating country is an important action to upgrade the trade war into a financial war,” Chen, who remains an influential figure on economic issues, told a forum over the weekend.

Zhu of the central bank told Reuters that in the short run, external shocks will play a role by influencing the yuan’s movements.

“That said, as long as RMB moves in an orderly manner based on market supply and demand, such movements in either direction do not necessarily mean disorderly movement of capital flow,” she said. The yuan is also known as renminbi, or RMB.

Zhu reiterated that recent yuan volatility was a normal market reaction to escalating trade tensions, adding “If it’s preventing such responses that would constitute real manipulation.”

Analysts say a weaker yuan could help China’s ailing exporters to cope with higher U.S. tariffs amid an escalating trade war, but any sharp yuan drops could fuel capital outflows as the world’s second-largest economy faces increased headwinds.

REPEATED PLEDGES

Chinese leaders have repeatedly pledged that they would not resort to competitive currency devaluation to support exports, or use the currency as a tool to cope with trade disputes.

Zhu said the yuan will be supported by China’s solid economic fundamentals, a stable debt ratio, contained financial risks, adequate foreign exchange reserves, and favorable interest rate spreads between China and major advanced economies.

“Over the medium and long term, we have full confidence in RMB as a strong currency,” she said.

In the second quarter, China’s annual economic growth pace slowed to a near 30-year low of 6.2%. Many analysts had expected a steadying in the second half as earlier stimulus measures started to kick in, but Trump’s latest tariff threat is likely to further pressure exporters and their domestic supply chains.

China’s foreign exchange reserves – the world’s largest – fall by $ 15.54 billion in July to $ 3.104 trillion, central bank data showed, amid rising trade tensions.

China burned through $ 1 trillion of reserves supporting the yuan in the last economic downturn in 2015, during which it devalued the currency in a surprise move. Since then, Beijing has shored up restrictions on capital outflows.

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“We don’t doubt Draghi’s powers of persuasion” – Deutsche Bank

Deutsche Bank says that Draghi will get the job done for the ECB to pursue more easing monetary policy

Draghi ECB

The firm notes that the ECB meeting yesterday reaffirms the notion that we’re headed towards a policy easing package in September and believes that Draghi can persuade members of the governing council to deliver on that:

“The latest policy communications were a tale of two halves, however. In a departure from the norm, the Policy Decision statement was used to convey the primary policy message. There was an opportunity for Draghi to reinforce the dovish tone in the press conference, but the Q&A did not achieve this. If anything, the effect was the opposite. In that sense, Draghi has only half delivered on Sintra. He now has seven weeks to convince the Council to keep with him and deliver a strong enough easing package. Given his powers of persuasion, we don’t doubt him.”

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As for the firm’s expectations, they have now changed their call of just a 10 bps deposit rate cut this year to a 10 bps rate cut in September (alongside rate tiering) followed by an additional 10 bps rate cut in December.

Meanwhile, they also changed their baseline scenario for September to include QE with the expectation of a €30 billion per month package for a minimum of 9-12 months split evenly between public and private assets.

However, the firm argues that the re-introduction of QE is still a close call and if data/events surprise to the upside in the mean time, the ECB could stall on that decision.

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Societe Generale sued for $792 million by heirs of Cuban bank seized by Castro

By Jonathan Stempel

(Reuters) – The family of the former owners of a Cuban bank seized by Fidel Castro’s government nearly six decades ago sued Societe Generale (PA:) for approximately $ 792 million, saying the French bank owes damages for circumventing U.S. sanctions against Cuba.

In a complaint filed on Wednesday with the U.S. District Court in Miami, 14 grandchildren of Carlos and Pura Nuñez, who once owned Banco Nuñez, want to hold Societe Generale liable under U.S. law for doing business with Cuba’s central bank, which nationalized Banco Nuñez and other lenders in 1960.

A lawyer for the plaintiffs said he believed the case was the first against a bank that allegedly “trafficked” in property expropriated by the Castro regime, since the Trump administration said in April it would begin letting U.S. nationals sue companies for such conduct.

“Victims of the Cuban regime who had their property confiscated now have a vehicle to get justice,” Javier Lopez, the lawyer, said in an interview. “We have multiple financial institutions that we’re looking to target.”

Societe Generale did not immediately respond to requests for comment after market hours.

The lawsuit was filed eight months after Societe Generale agreed to pay $ 1.34 billion and enter a deferred prosecution agreement to settle U.S. and New York regulatory charges that it handled billions of dollars of transactions related to Cuba and other countries under U.S. sanctions.

According to the plaintiffs, Societe Generale generated hundreds of millions of dollars of fees by lending money to and processing transactions for Banco Nacional de Cuba from 2000 to 2010.

The plaintiffs said they own a claim to 10.5% of the equity in Banco Nacional de Cuba, roughly the percentage that Banco Nuñez represented when it was seized.

Lawyers for the plaintiffs at Kozyak Tropin & Throckmorton based the $ 792 million damages estimate on Banco Nuñez’s $ 7.8 million worth at the time, plus 6% annual interest and triple damages under the Helms-Burton Act, a 1996 federal law.

The right to sue under that law had been suspended for 23 years because of opposition from the international community and concern that U.S. courts could be overrun by lawsuits.

Secretary of State Mike Pompeo announced the lifting of that suspension in April, to boost pressure on Havana to end Cuban support for Venezuela’s socialist president, Nicolas Maduro.

The case is Sucesors de Don Carlos Nuñez y Doña Pura Galvez Inc v Societe Generale SA, U.S. District Court, Southern (NYSE:) District of Florida, No. 19-22842.

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.

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Deutsche Bank U.S. Cuts May Go Deeper Than Equities, Rates

© Bloomberg. People enter Deutsche Bank AG headquarters on Wall Street in New York, U.S., on Thursday, April, 26, 2018. Deutsche Bank AG is planning to cut more than 10 percent of U.S. jobs as it withdraws from businesses where it can't compete, a person briefed on the matter said. © Bloomberg. People enter Deutsche Bank AG headquarters on Wall Street in New York, U.S., on Thursday, April, 26, 2018. Deutsche Bank AG is planning to cut more than 10 percent of U.S. jobs as it withdraws from businesses where it can’t compete, a person briefed on the matter said.

(Bloomberg) — Deutsche Bank (DE:) AG’s job cuts across the U.S. will probably go far beyond equities and interest-rate derivatives trading, which have been marked as major targets, according to people with knowledge of the matter.

The German lender plans to start informing U.S. workers of the reductions beginning Monday provided its restructuring plan is adopted over the weekend, the people said, asking not to be identified because the matter is private. They didn’t give further details on which businesses may be affected.

Chief Executive Officer Christian Sewing is poised to adopt a sweeping restructuring plan focused on as many as 20,000 job cuts worldwide and a pullback from large areas of investment banking, the people have said. The bank may shutter U.S. equities trading entirely and a number of senior executives including U.S. chief Tom Patrick are leaving the bank, they said. The bank hasn’t yet detailed the cuts or how they’ll be distributed.

A Deutsche Bank spokesman declined to comment.

Germany’s largest lender employed 9,253 people in the U.S. at the end of 2018, down more than 10% on the previous year on the back of a restructuring Sewing introduced a little more than a year ago. Though the regional unit made a small profit last year, it racked up billions of dollars in losses in the preceding years. It has also been repeatedly under fire from U.S. regulators even though it recently passed the Fed’s stress test.

European operations are expected to fare much better. Deutsche Bank’s Nordic region chief Jan Olsson predicted that the overhaul will have little impact on the businesses he oversees. The area is “an integral part of the strategy at Deutsche Bank,” he said in an interview on Thursday.

Sewing has repeatedly said that Deutsche Bank remains committed to its U.S. presence, as the company wants to ensure it can continue to cater to the capital markets needs of large European companies. The lender may finalize the restructuring when the board meets this weekend.

(Updates with Nordic region CEO in sixth paragraph.)

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.

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Australia’s Central Bank Looks Likely to Cut Rates ⁠— From the Outback

© Reuters.  Australia’s Central Bank Looks Likely to Cut Rates ⁠— From the Outback © Reuters. Australia’s Central Bank Looks Likely to Cut Rates ⁠— From the Outback

(Bloomberg) — The Reserve Bank of Australia’s policy decision on Tuesday is more unusual than most.

Not only could Governor Philip Lowe and his board deliver a second consecutive interest-rate cut –- the last time the RBA did that was in 2012 — it’s also the first time they will meet in Darwin in more than 50 years.

A city closer to Jakarta than Sydney, Darwin is a symbolic trip for the policy makers. Lowe will deliver a speech on his rates policy to community leaders and then plans to travel to East Arnhem Land to meet with indigenous groups and pay respects to the RBA’s first governor, the legendary H.C. ‘Nugget’ Coombs, half of whose ashes lie in the area.

The last time the RBA’s board met in Darwin it adjusted policy to encourage saving. Fifty-one years later, Lowe and his colleagues return with the aim of spurring Australians to spend.

The central bank is striving to revive an economy that’s just clocked 28 years without recession, yet is on track for its weakest fiscal year since 1991. Markets are pricing in a 70% chance that the RBA will take rates to a record 1% on Tuesday, while 21 of 32 economists in a Bloomberg survey expect them to move.

Lowe and his board have a number of risks to balance: domestically there’s a sagging property market making consumers hesitant, and a government infrastructure boost coming; globally, a U.S.-China trade truce for now won’t do much to halt a slowdown in China and the world economy.

The RBA chief must sometimes wish he had the levers available to Coombs. At the June 1968 board meeting a shortage of liquidity led the RBA to lift the bank deposit rate in order to spur saving. Lowe, in contrast, is regularly inundated with letters from savers — often older Australians — complaining his rate cuts are eroding their income.

The RBA’s 1968 Darwin meeting was actually the mid-point in an Outback odyssey that saw the board fly through Queensland, the Northern Territory and Western Australia to look at new mines that were springing up. It was a different era: these days Lowe and his deputy, Guy Debelle, aren’t supposed to be in a plane together, let alone the whole board.

Community Engagement

The RBA’s return to Darwin five decades on is more coincidence than design. Officials say board members find the community engagement aspect of trips outside Sydney useful to help understand sentiment. Having recently journeyed to Hobart, Darwin was the obvious next choice. Once that visit was decided, it was suggested the RBA try to rekindle the relationship with the people of East Arnhem Land.

Coombs’s ties with the region dated back to a dispute over copyright on the artwork on the A$ 1 bill by artist David Malangi. In 1967, Coombs met Malangi and resolved the issue, and also began an association that would stretch through until Coombs’s death in 1997 at age 91. (Half of his ashes were scattered at the Australian National University and the other half in East Arnhem Land).

In his final nine months as governor through 1968, Coombs was also chairman of the Council of Aboriginal Affairs and an early proponent of reconciliation. He would take up the cause of Arnhem Land’s people in their fight against a bauxite mine constructed in the area; this involved the famous bark petition protest that is now on display in parliament house.

Despite his extensive contacts in government, Coombs was unable to halt the mine. But he would make contact with a young Galarrwuy Yunupingu, who would go on to be a leader of the Australian indigenous community and older brother to Mandawuy, late front man of rock group Yothu Yindi.

It is this history Lowe is seeking to reconnect the RBA with. Together with Catherine Tanna, a board member and managing director of EnergyAustralia; Susan Moylan-Coombs, a broadcaster and granddaughter to Nugget who was also a member of the Stolen Generation; Philip Gaetjens, Secretary to the Treasury who sits on the central bank board; and Anthony Dickman, secretary at the RBA.

If rates are cut and all goes well, it will at the very least give the governor a day free of letters from angry pensioners.

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