Here’s a bank with a ‘chill out’ view on coronavirus

Adam posted the number of cases on Monday at 

  • Jan 27: 2,744

The update today is up 1700+ cases

  • Jan 28: 4,515

Yeah, most all of it happening in Wuhan, with some cases elsewhere in China and globally. Is it OK to relax on this? 

Barclays think so. Analysts there cite the 2003 SARS outbreak, and say if that is indicative the market is over reacting. Big market moves are due to stretched positioning and a not stellar global macro background picture.

S&P 500 shorts/put option holders probably not bothering to argue with anyone about whether its over done or not. 

On the other hand, folks who zoom out the chart to the past 10 years might well say its nothing. 

As is often the case in markets, something for everyone. 

Adam posted the number of cases on Monday at 

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Switzerland’s Central Bank Is Stomaching Stronger Franc For Now

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Sight deposits at the Swiss National Bank increased only marginally last week, suggesting President Thomas Jordan and his colleagues aren’t taking much action to counter the strengthening franc.

Iran-U.S. tensions and fears about the spreading Coronavirus has lifted the haven franc this year. Earlier on Monday, it breached the 1.07 per mark to touch a fresh three-year high.

Yet total sight deposits rose just 0.22% to 587 billion francs ($ 605 billion) in the week ending Jan. 24, central bank figures show.

While there’s been no evidence of interventions recently, the threat of action remains remains alive. SNB President Thomas Jordan told Bloomberg Television last week that the pledge to sell the franc if needed remains in place alongside the central bank’s record-low interest rates.

Last week, euro-area officials expressed optimism over signs of economic stabilization, citing easing global trade tensions and a mildly expansionary fiscal policy. UBS Group AG reversed its call for an SNB rate cut in March.

“The SNB is tolerating a bit stronger franc, maybe also because the economic environment is looking a bit better,” Credit Suisse (SIX:) Group AG economist Maxime Botteron said.

Responding to a U.S. decision to add Switzerland back on its watch list for currency manipulators, Jordan said the SNB was only looking to stave off deflationary conditions with its purchases of foreign currency.

He also said the SNB had the room to further cut its deposit rate, now at -0.75%,

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Room is limited for further RRR cuts in China: central bank official

BEIJING (Reuters) – China’s reserve requirement ratio (RRR) is at appropriate level and there is limited room for further cuts, a central bank official said on Thursday.

China will make timely adjustments to benchmark deposit rates, and should pay more attention to changes in real interest rates when discussing whether to cut interest rates, Sun Guofeng, head of monetary policy department of the People’s Bank of China told a news briefing in Beijing.

Real interest rates have been falling significantly and funding costs for small firms also declining, Sun added.

The PBOC has cut RRR eight times since early 2018, including one earlier this month, to help shore up the cooling economy. Analysts have forecast more this year.

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.

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Thai central bank says ready to curb resilient baht if needed

By Kitiphong Thaichareon and Orathai Sriring

BANGKOK (Reuters) – Thailand’s central bank is still concerned about the strength of the baht and is ready to take further action if necessary, a deputy central bank governor said on Tuesday.

The baht’s gains have been driven by the country’s large current account surplus, and not speculation in the currency, Mathee Supapongse told a news briefing.

“We have a lot of weapons ready, but there is no speculation from foreign investors yet,” he said, adding the central bank was monitoring the market closely.

As Asia’s best performing currency in 2019, the baht rose nearly 9% against the dollar, putting more pressure on the export-dependent economy amid global trade tensions and markets are concerned the authorities will introduce capital controls, among other steps.

The baht traded at 30.24 per U.S. dollar at 0510 GMT.

Rising international reserves show the Bank of Thailand (BOT) has closely managed the baht by buying dollars, Mathee said. The reserves increased by $ 18 billion to $ 223 billion in 2019.

“If the BOT had not intervened, the reserves would not have risen and the baht may have been stronger than this,” he said.

But the central bank is mindful of side-effects and limitations of currency intervention, as it may face trade protagonist measures from other countries, he said.

On Monday, the U.S. Treasury said Thailand was close to triggering thresholds to be added to its currency monitoring list.

Mathee also said quantitative easing was not suitable for Thailand due to very high liquidity and it would largely benefit certain business groups.

The central bank will further relax rules to spur outbound investment to help ease upward pressure on the baht, he said.

Last year, the BOT introduced steps against short-term speculative inflows and relaxed rules to spur fund outflows in a bid to curb the baht’s strength.

In November, the central bank said within the next three months the limit exporters can keep proceeds abroad will be raised to $ 1 million per lading bill from $ 200,000 currently. Such proceeds account for about 80% of all exports.

While the baht’s appreciation has affected the economy by hurting export competitiveness, it has benefited importers and companies and individuals with foreign debt, he added.

The central bank has forecast Southeast Asia’s second-largest economy will expand 2.8% this year after growing by an estimated 2.5% in 2019, a five-year low.

(GRAPHIC: Thailand’s GDP, exports and consumption – https://fingfx.thomsonreuters.com/gfx/mkt/13/367/367/Thailand’s%20GDP,%20exports%20and%20consumption.png)

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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US to Iraq: Kick out our military and we will seize your central bank accounts

US puts the petrodollar at risk

US puts the petrodollar at risk

The US warned Iraq that if it kicks American forces out of the country, it would lock the country out of its central bank accounts held at the New York Fed.

Iraq uses the account to settle oil sales of oil and other international transfers.

Iraq’s elected legislature voted last week to expel US troops who were invited to the country to fight ISIS in 2014. The Prime Minister moved forward with those plans this week in a call with Secretary of State Mike Pompeo.

The threat may spark a shift away from US dollar use and pricing in the international oil trade. It could also cause other countries to reconsider keeping money or other financial assets in the United States.

An adviser to the prime minister, Abd al-Hassanein al-Hanein, said that while the threat of sanctions was a concern, he did not expect the U.S. to go through with it. “If the U.S. does that, it will lose Iraq forever,” he said.

In its most-recent disclosures from end-2018, Iraq’s central bank said it held $ 3 billion in overnight deposits at the NY Fed.

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Lebanon central bank head: ‘nobody knows’ how much pound could weaken

BEIRUT (Reuters) – Lebanon’s central bank governor said on Thursday “nobody knows” how much more the cost of dollars could rise on the black market in a country suffering its worst economic crisis in decades.

The Lebanese pound, pegged to the dollar for 22 years, has slumped by more than 30% on the parallel market, now the main source of hard currency as banks impose tight controls.

“We hope the country itself will improve so that the economy can improve,” Central Bank Governor Riad Salameh told reporters on Thursday. Asked how much higher the cost of dollars would rise, he said “nobody knows”. He did not elaborate.

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Poland’s president appoints new central bank policymaker

WARSAW (Reuters) – Poland’s President Andrzej Duda on Friday appointed his former adviser Cezary Kochalski to the country’s Monetary Policy Council (MPC) to replace one of the few remaining hawks on the panel that has held rates steady since 2015.

Kochalski joins the MPC at a time of unprecedented stability in monetary policy as rate setters adopt a wait-and-see stance in the face of inflationary pressures at home and an economic slowdown in the euro zone.

Kochalski, a professor at the Poznan University of Economics and Business with experience at Poland’s financial supervision authority, replaces Jerzy Osiatynski, one of the few panel members who has said rates may have to rise.

Osiatynski’s term came to an end on Dec. 20.

Poland’s benchmark interest rate has been at a record low of 1.5% since 2015, and central bank governor Adam Glapinski has repeatedly said that rates are likely to remain on hold until his term ends in 2022.

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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Mexico Central Bank Prepared to Act If Inflation, Risks Stay Low

© Reuters.  Mexico Central Bank Prepared to Act If Inflation, Risks Stay Low © Reuters. Mexico Central Bank Prepared to Act If Inflation, Risks Stay Low

(Bloomberg) — Mexico’s central bank could take monetary policy action as soon as February if it sees that inflation as well as internal and external risks remain low, Governor Alejandro Diaz de Leon said in an interview.

“We have to monitor if conditions in the economy continue having this favorable trend in terms of inflation and lower external and internal risks, and if this occurs it allows us to take monetary policy actions,” he said. “But this is precisely what we’ll be monitoring from now until the next decision.”

The central bank has cut borrowing costs by a quarter point in each of its past four rate decisions to 7.25%, but still has one of the highest real rates in the world. That’s fueled division within the board about how quickly it should ease monetary policy without risking a rebound in inflation and peso volatility.

Inflation has slowed markedly, and even fell below target to 2.63% in early December. The peso has been the best performing major emerging market currency this year, gaining further after the U.S. House of Representatives voted for an updated North American free trade agreement with Mexico and Canada.

Capital Flows

Diaz de Leon, who has voted with the majority for a cautious easing cycle, signaled that Mexico’s monetary policy may be better positioned to mitigate fluctuations in investor flows than to boost an economy that has low lending rates.

“Monetary policy channels are different for different economies,” Diaz de Leon said in what he described as his last interview of 2019. “In Mexico, probably due to its low penetration in financing as a percentage of GDP, it has a credit channel and sensitivity to interest rates different than other economies.”

And yet “we’re an economy very open to capital flows,” he added.

He said, however, that the central bank isn’t “pre-announcing” future policy actions and will make its decision based on data available at the time of its meetings.

Dissenting Votes

Diaz de Leon said that Mexico’s minimum wage hike of 20% for 2020 is expected to have a moderate impact on inflation. He wouldn’t respond to recent comments from fellow board member Gerardo Esquivel, who said on Twitter that those who criticize the wage hike seem to be using arguments from “Economy 101.”

Two out of five board members have repeatedly voted against the majority and for deeper half-point cuts amid concerns over an economy that dipped into a technical recession earlier this year.

In contrast to the prior three decisions, only one member voted for a deeper half-point cut in the December 19 meeting. All five members voted, said Diaz de Leon, after speculation arose that either Esquivel or Jonathan Heath, the two who had sought deeper cuts in previous meetings, had been absent.

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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Forget Rate Decisions. Loonie Traders Bank on Canada Immigration

© Reuters.  Forget Rate Decisions. Loonie Traders Bank on Canada Immigration © Reuters. Forget Rate Decisions. Loonie Traders Bank on Canada Immigration

(Bloomberg) — In an era of low global interest rates, currency traders will have to look elsewhere for an impetus. In Canada, they can bank on population growth.

The flood of immigrants and non-permanent residents to levels not seen in a century has been one of the main drivers supporting Canada’s economic expansion over the past several years. That has kept the Bank of Canada as an outlier in the global easing trend as it held its policy rate unchanged, bolstering the allure of the loonie.

“These high levels of immigration — if they are to continue and help support growth — are actually supportive of a Canadian dollar over time,” Frances Donald, chief economist at Manulife Investment Management, said in an interview in Toronto.

The country’s population grew by 208,234 in the July to September period, or 0.6%, the fastest quarterly increase since at least 1971. Some 83% of that increase is due to international migration, according to estimates from Statistics Canada released Thursday in Ottawa. Over the past year, Canada’s population has jumped by almost 560,000, an increase of 1.5% — that’s the fastest annual pace since 1990.

“This is the story I think markets are missing: how powerful immigration is at actually changing your financial markets, particularly your rates and FX,” Donald said.

The is on pace to take the No. 1 spot among its Group-of-10 counterparts this year, strengthening by about 4% against the U.S. dollar.

Canada’s population boom has driven robust gains in the housing and labor markets, countering the effect of an aging demographic. This has helped to avoid the Japanification trap of low growth, low inflation and low interest rates that are slowly becoming evident in other parts of the world.

“What’s fascinating about the story however, from a strategist, like myself, is not even how it relates to GDP growth but how we’re substituting one form of policy for another,” Donald said.

While Donald argues immigration can be a proxy for monetary policy, currency strategists say the central bank is still the main driver of the loonie, and immigration is more of a long-term variable that can influence policy.

“Immigration informs the output gap and hence policy stance,” wrote Mazen Issa, senior FX strategist at TD Securities in New York. “FX will react to how the Bank changes policy.”

Case in point, Bank of Canada Governor Stephen Poloz has cited the country’s robust labor force, supported by new entrants, as a reason for holding interest rates despite concerns around a slowdown.

Relying on human capital to improve growth and inflation numbers over time actually acts as a curve steepener, Donald added. “If we rely on this so called human stimulus then we don’t have to rely on monetary policy to the same extent.”

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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Bank of Italy reform in spotlight after latest bank bailout

By Giuseppe Fonte and Gavin Jones

ROME (Reuters) – Italy’s ruling coalition may change the way the country’s central bank exercises its supervisory powers, a senior politician said on Friday, following the costly bailout of a small southern bank.

In the latest of several state rescues of ailing lenders, the government this week approved an emergency decree granting a lifeline of up to 900 million euros ($ 992 million) to cooperative bank Popolare di Bari.

Successive Italian governments, with support from healthy banks, have spent more than 20 billion euros to manage a raft of banking crises since 2015. In many, politicians have blamed the Bank of Italy and its governor Ignazio Visco. Both have always denied responsibility.

Critics say a key factor in Popolare di Bari’s crisis was its 2014 acquisition of troubled rival Tercas. The takeover was authorized by the central bank but further weakened Pop Bari by increasing its bad loan burden.

Andrea Orlando, deputy leader of the co-ruling Democratic Party (PD), said the Pop Bari bailout suggested something was not working in the way the central bank policed the country’s lenders and the coalition needed to look into possible changes.

“If our suspicion is correct, we need to separate the Bank of Italy’s supervisory structure from its other functions,” he told Reuters in an interview.

“The Bank of Italy is both a player and a referee, so a clarification of the rules may be needed,” he added, referring to the fact that the central bank both polices the banks and rules on mergers.

The Bank of Italy declined to comment for this article.

This week it blamed the European Commission, saying legal objections in Brussels to the merger with Tercas had delayed the operation, “with significant negative consequences for both banks.”

The other ruling party, the anti-establishment 5-Star Movement, has been more aggressive in its proposals to reshape the central bank.

Some of its lawmakers want to give politicians the power to name the bank’s board, ending the current system by which appointments are made mainly internally, a prominent party source told Reuters, asking not to be named.

“I think in the next few months we need to launch a reform of the Bank of Italy’s governance,” 5-Star leader Luigi Di Maio told state television network RAI this week, without giving details.

Orlando said the PD would not back 5-Star if it insisted on trying to limit the central bank’s autonomy in appointments, potentially opening a new source of tension among ruling parties already split on issues from the economy to migrant rights.

The proposals for changes at the central bank are likely to come to a head in a parliamentary committee to be set up early next year to investigate the reasons for the succession of collapses at Italian lenders.

Economy Minister Roberto Gualtieri, from the PD, said on Thursday that the government would clarify “to what extent there have been shortfalls on the part of the supervisor.”

(editing by John Stonestreet)

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