German industry association says companies have no choice but to prepare for a hard Brexit

Not exactly a good backdrop ahead of talks between Johnson and Merkel

Germany
  • UK PM Johnson’s call to reopen withdrawal agreement is irresponsible

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I don’t think it is much of a coincidence to see these comments ahead of Johnson’s visit to Berlin today. With the German economy already on the brink of a technical recession, a hard Brexit will no doubt exacerbate the downturn experienced.

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Argentina Treasury minister resigns, says ‘significant renewal’ needed amid economic crisis

By Eliana Raszewski

BUENOS AIRES (Reuters) – Argentina’s Treasury Minister Nicolas Dujovne has resigned, saying in a letter seen by Reuters on Saturday he believed the government needed “significant renewal” in its economic team amid a crisis which saw the peso plunge this week.

Dujovne said in a letter to Argentine President Mauricio Macri that he had given his all to the job, helped tame a significant deficit and trim public spending but conceded: “Mistakes have been made, without a doubt.”

“I believe my resignation is in keeping with my place in a government… that listens to the people and acts accordingly,” he added. 

Macri has appointed Hernan Lacunza , the current economy minister for Buenos Aires province, as Dujovne’s replacement, a government source told Reuters. 

(Reporting Eliana Raszewski; writing by Aislinn Laing; Editing by Marguerita Choy)

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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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RBA’s Kent Says Rate Cuts, Currency Drop Are Providing Stimulus

(Bloomberg) — Australia’s back-to-back interest-rate cuts are flowing through the financial system and into the economy, while the falling currency should provide a similar stimulus to sustained declines of previous years, a senior Reserve Bank official said.

“The transmission of monetary policy in Australia to financial conditions is working in the usual way,” Christopher Kent, assistant governor for financial markets, said in Sydney Tuesday. “In particular, the change in the stance of policy has underpinned the decline in risk-free rates along the yield curve. It has also contributed to a decline in the cost of funding in corporate bond markets, supported equity prices, and lowered the cost of funding for banks.”

Kent also said in his speech to the Finance & Treasury Association that much of the reduction in banks’ funding costs has been passed through to business and household borrowers. The cash rate currently stands at 1%, with traders pricing in another quarter-point cut this year and a further one in 2020.

Kent noted that a spike in commodity prices over the past year had impacted the currency less than in the past, due to expectations that the supply-driven gains were likely to be short-lived. He estimated that, in trade-weighted terms, the dollar was down about 7% over the past year; it was trading at 67.57 U.S. cents at 10:52 a.m. in Sydney, near the lowest level since 2009.

Some Support

“Notwithstanding an easier stance of monetary policy globally, the decline in interest rates in Australia has contributed to the depreciation of the Australian dollar,” he said. “That broad-based easing in financial conditions in Australia will provide some additional support to demand in the period ahead.”

Asked after the address whether the currency would deliver the same impetus to the economy as on previous occasions, given changes in the industrial base, Kent was categorical in his response: “Absolutely.”

“Education and tourism benefit just as much through a depreciation in terms of their competitiveness as any other industries which are no longer so prominent,” he said. “So yes I think it’s going to have about the same sort of effect in terms of the stimulus.”

Kent was also asked whether the central bank’s focus was still inflation or perhaps unemployment or even under-employment now. He reiterated the bank’s line that there was more spare capacity in the economy than had been anticipated, as strong hiring had been met by a “substantial increase” in the participation rate.

“We’re certainly not unemployment rate targeters, we still are inflation targeters,” he said. “But it’s a dual mandate, we care about inflation, we care about full employment. We care about the general welfare of the populace.”

(Updates with Q&A currency comments from first paragraph.)

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North Korea says Kim Jong Un oversaw test firings

North Korean media reported that leader Kim Jong Un supervised Saturday’s launch of a new weapons system, hours after President Trump said Kim had written him a letter with a “small apology” for the recent missile tests. South Korean media said Saturday that North Korea fired two more unidentified projectiles into East Sea.

“In a letter to me sent by Kim Jong Un, he stated, very nicely, that he would like to meet and start negotiations as soon as the joint U.S./South Korea joint exercise are over. It was a long letter, much of it complaining about the ridiculous and expensive exercises,” Mr. Trump wrote on Twitter Saturday morning. 

North Korea’s Foreign Ministry in a separate statement on Sunday blasted South Korea for continuing to host military drills with the United States, and said that its future dialogue will be held strictly between Pyongyang and Washington and not between the Koreas.

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South Korea’s military said the North on Saturday fired what appeared to be two short-range ballistic missiles. It said they flew about 248 miles before landing in waters between the Korean Peninsula and Japan. 

KCNA picture of North Korean leader Kim Jong Un guiding the test firing of a new weapon
North Korean leader Kim Jong Un guides the test firing of a new weapon, in this undated photo released on August 11, 2019 by North Korea’s Korean Central News Agency (KCNA).  KCNA / REUTERS

Kim expressed “great satisfaction” over the launches, which Pyongyang’s Korean Central News Agency said verified that the new weapon system performs as designed. The official Rodong Sinmun newspaper published several photos that showed Kim watching from an observation post and what appeared to be a missile soaring from a mobile launcher. 

The agency didn’t specify whether the weapons were ballistic missiles or rocket artillery, but said they were developed to suit the North’s “terrain condition” and provide “advantageous tactical character different from existing weapons systems.”

Kim Dong-yub, an analyst at Seoul’s Institute for Far Eastern Studies, said that North Korea’s photos and South Korea’s flight data of the launches suggest that the North tested a new weapon system that is different from the short-range ballistic missiles it repeatedly fired in recent weeks.

South Korea’s military had described the previous missiles as similar to the Russian-made Iskander, a solid-fuel, nuclear-capable missile that is highly maneuverable and travels on low trajectories, improving its chances of evading missile defense systems.

North Korea’s fifth round of weapons launches in less than three weeks was seen as a protest of the slow pace of nuclear negotiations and continuance of the U.S.-South Korea military drills the North claims are an invasion rehearsal.

Experts say Mr. Trump’s downplaying of the North’s launches allowed the country more room to intensify its testing activity while it seeks to build leverage ahead of a possible resumption of negotiations. Talks have stalled since the collapse of Mr. Trump’s second summit with Kim in Vietnam in February over disagreements on exchanging sanctions relief and disarmament, although Mr. Trump made a historic trip into North Korea after the G20 conference in June. 

By launching a slew of weapons that directly threaten South Korea but not the U.S. mainland or its Pacific territories, North Korea also appears to be dialing up pressure on Seoul to make stronger efforts to coax major concessions from the United States on Pyongyang’s behalf.

North Korea in recent months has ignored the South’s calls for dialogue while demanding that Seoul turn away from Washington and resume inter-Korean economic cooperation held back by U.S.-led sanctions against the North.

In a statement released through KCNA, Kwon Jong Gun, director of the U.S. affairs department at Pyongyang’s Foreign Ministry, criticized South Korea for raising concerns over the North’s recent testing activity while continuing the drills with the U.S.

The North also on Saturday lashed out at South Korea’s recent acquisition of U.S.-made F-35 fighter jets and other plans to expand its military capabilities, saying that the South will gain “nothing but destruction” if it pursues a contest of strength with the North.

“Though we are to enter into a dialogue in future as the currents flow in favor of dialogue, (the South) had better keep in mind that this dialogue would be held strictly between the D.P.R.K and the U.S., not between the North and the South,” Kwon said, referring to North Korea by its formal name, the Democratic People’s Republic of Korea.

“Given that the military exercise clearly puts us as an enemy in its concept, (the South) should think that an inter-Korean contact itself will be difficult to be made unless they put an end to such a military exercise or before they make a plausible excuse or an explanation in a sincere manner for conducting the military exercise,” Kwon said.

South Korea has said North Korea’s recent launches could hurt efforts to stabilize peace on the Korean Peninsula and called for the North to uphold an agreement to form a joint military committee to discuss reducing tensions, which was part of an inter-Korean military agreement reached last year.

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IMF says China may need more stimulus if trade war worsens

© Reuters. Customers are served at a counter at a currency exchange store in Shanghai © Reuters. Customers are served at a counter at a currency exchange store in Shanghai

By David Lawder

WASHINGTON (Reuters) – The International Monetary Fund on Friday stood by its assessment that the value of China’s yuan was largely in line with economic fundamentals, but an IMF official said the fund was encouraging China to pursue a more flexible exchange rate with less intervention.

James Daniel, director of the IMF’s China department, said that an assessment of China’s economic policies found the yuan exchange rate in 2018 to be “not significantly over-valued or under-valued.”

The IMF’s views on the yuan are at odds with those of its largest shareholder, the United States, which this week declared China a “currency manipulator” after it allowed the yuan to slip below 7 to the dollar to 11-year lows.

U.S. Treasury Secretary Steven Mnuchin is seeking to engage the IMF to help “correct” an unfair trade advantage from Beijing’s currency actions, but Daniel declined to say how the IMF was responding to the request.

“Our discussions with the U.S. Treasury are ongoing on a range of issues,” Daniel told reporters on a conference call, echoing an earlier statement from an IMF spokesperson.

The IMF said in the report that a worsening of trade tensions with the United States could put China’s economic and financial stability at risk, making new fiscal stimulus measures from the government warranted.

The IMF said if the United States were to impose 25% tariffs on a remaining $ 300 billion list of Chinese imports, this would reduce China’s growth by around 0.8 percentage points over the following 12 months, driven by a sharp fall in demand and a tightening of financial conditions. Negative global spillovers could be significant, it added.

Daniel said that a 10% tariff on this category of goods — as U.S. President Donald Trump intends to impose on Sept. 1 — could result in a 0.3 percentage point cut to growth.

Weighed down by weak demand at home and abroad, China’s growth slowed to 6.2% in the second quarter, a near 30-year low.

More exchange rate flexibility could help China deal with these external pressures, freeing up monetary policy to deal with domestic demand conditions, Daniel said.

He also said the IMF was pressing China for structural reforms to its economy, including opening more sectors to foreign competition and reducing the role of the state in certain industry — goals also broadly sought by the Trump administration.

“We see continued rebalancing and opening up by China and increased exchange rate flexibility as being in China’s own interests and also benefiting the global economy.”

IMF directors in a statement agreed with staff assessments that China’s external position in 2018 was broadly in line with fundamentals.

But they also called for more transparency in China’s exchange rate policies, the IMF said, with some seeking disclosures of China’s foreign exchange market interventions.

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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North Korea fires more projectiles, South Korea says

South Korea’s military said Saturday that North Korea fired two more unidentified projectiles into East Sea, Yonhap reported. North Korea has launched short-range missiles at least four other times since July 25 as the U.S. and South Korea prepare joint military exercises.

South Korea’s Yonhap news agency reported Saturday that Seoul’s Joint Chiefs of Staff said the projectiles were launched from an area near the North’s east coast. It didn’t immediately identify the projectiles or how far they flew, but North Korea has unleashed a series of test firings of short-range ballistic missiles in recent weeks.

The North Korean missile tests, which Donald Trump has repeatedly played down, come amid stalled diplomatic talks with the U.S. on the North’s nuclear program. So far, North Korea has stuck by its unilateral suspension of nuclear and long-range missile tests, which came during a diplomatic outreach to Washington last year. 

Trending News

The North described recent test-firings as a new rocket artillery system and short-range ballistic missile launches. It previously called them a “solemn warning” to South Korea over its plans to continue military drills with the U.S. Experts say the North’s weapons display could intensify in the coming months if progress isn’t made on the nuclear talks.

On Friday, Mr. Trump said he received another “beautiful letter” from North Korean leader Kim Jong Un and hinted there would be another meeting between them. Mr. Trump made a historic trip into North Korea with Kim in June. 

In an interview with Fox News after the first missile launch, Mr. Trump said he was “getting along well” with Kim and said the country “really haven’t tested missiles other than smaller ones.”

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Forex – U.S. Dollar Dips as Trump Says No Deal to Huawei 

© Reuters.  © Reuters.

Investing.com – The U.S. dollar fell slightly on Friday after U.S. President Donald Trump said America will cut all ties with Chinese tech company Huawei in a signal that the tit-for-tat trade war is unlikely to end anytime soon.

The , which measures the greenback’s strength against a basket of six major currencies, fell 0.1% to 97.417 by 10:48 AM ET (14:48 GMT).

The news came after Beijing halted its purchases of U.S. farming goods on Monday. Trade tensions escalated this week after the U.S. officially declared China a currency manipulator and China allowed the yuan to weaken to below 7 to the dollar.

In additions, Huawei was blacklisted in May for national security concerns, which prevented American companies from doing business with the tech giant.

The Japanese yen, which is seen as a safe-haven in times of market turmoil, rose with down 0.4% to 105.59.

The euro inched up slightly, held back by political uncertainty in Italy after Deputy Prime Minister Matteo Salvini called for a vote of no confidence in the governing coalition, which could lead to snap elections. rose 0.2% to 1.1198.

Meanwhile fell 0.5% to 1.2073 after second-quarter GDP fell 0.2%, increasing recession fears on the back of Brexit uncertainty.

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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North Korea says missile launches were warnings against U.S.-South Korea military exercises

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Trump adviser says currency intervention off the table; Trump less clear

By Makini Brice and Steve Holland

WASHINGTON (Reuters) – The Trump administration has “ruled out” intervening in markets to lower the U.S. dollar’s value, even though President Donald Trump is concerned other countries are weakening their currencies to gain a trade advantage, a top White House adviser said on Friday.

“Just in the past week, we had a meeting with the president and the economic principals and we had ruled out any currency intervention,” White House economic adviser Larry Kudlow told CNBC.

White House adviser Peter Navarro, a trade hard-liner, presented Trump on Tuesday with ideas on how to devalue the dollar as a way to pressure China in an ongoing trade fight, according to a source familiar with the matter, confirming a Politico report, which said the president quickly dismissed the proposals.

Asked why he had decided not to act on them, Trump told reporters at the White House, “I didn’t say I’m not going to do something.”

Trump has publicly complained about the strength of the dollar, saying it hurts American competitiveness, but Kudlow disputed an assertion that the president wanted a weaker greenback. Rather, he said, other currencies should be stronger.

“I don’t agree with your assertion that the president wants a weak dollar,” Kudlow said. “What the president is concerned about is that foreign countries may be manipulating their own currencies lower to try to gain some short-term, temporary trade advantage.”

Kudlow told reporters later on Friday that the president wanted a steady dollar.

Trump, in his remarks to reporters, suggested he welcomed the dollar’s strength in so far as it is an emblem of a strong economy, even though it curbs U.S. exports.

“The dollar is very strong. The country is very strong,” he said. “It’s a beautiful thing in one way but it makes it hard to compete.”

“We have a very powerful dollar … It’s really become, more than ever before, the currency of choice,” Trump added, citing weakness in the euro. He also said China’s yuan was “very low.”

In a tweet on Monday, Trump complained that it was “very unfair that other countries manipulate their currencies.” He has blamed the U.S. Federal Reserve’s interest rate policy for much of the dollar’s strength and has been jawboning the central bank to cut rates at its two-day meeting next week.

“The Federal Reserve raised the rates too fast and too soon,” Trump lamented on Friday.

The central bank had been raising rates through the end of last year, and the substantial gap between U.S. borrowing costs and those in other developed economies has been seen as a contributor to the dollar’s strength. But, in response partly to what it sees as headwinds from Trump’s trade policies, the Fed is now expected to cut rates for the first time in more than a decade.

In the last 12 months, the ICE (NYSE:) () has gained about 3.5%, largely due to gains against the euro (). On Friday, the index touched the highest in two months and was less than 0.5% from its strongest levels in more than two years.

Against China’s yuan , it has risen by about 1.4% over the last 12 months, much of that coming in May after Trump raised tariff rates on billions of dollars of Chinese imports.

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