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On April 26, according to the Wall Street Journal, in order to simplify the negotiations on reciprocal tariffs, US negotiating officials plan to use a new framework developed by the Office of the United States Trade Representative (USTR), which lists major categories of negotiations, such as tariffs and quotas, non-tariff trade barriers, digital trade, product origin principles, economic security and other commercial issues. In these categories, US officials will put forward specific requirements for individual countries, but people familiar with the matter emphasized that this document may also be adjusted at any time. People familiar with the matter said that the United States initial plan is to negotiate with 18 major trading partners in turn over the next two months. The initial plan is to alternately participate in the talks with six countries per week for three weeks (six countries in the first week, another six countries in the second week, and another six countries in the third week) until the deadline of July 8. If US President Trump does not extend the 90-day suspension period he set by then, those countries that cannot reach an agreement will begin to face reciprocal tariffs.On April 26, after the United States announced additional tariffs on goods from many countries, Peruvian business people expressed concerns that the US governments extreme measures would disrupt the global trade order and may even trigger a global economic recession. Alvaro Barrenechea Chavez, vice president of the Peruvian-Chinese Chamber of Commerce, said that the negative impact of the US tariff policy has begun to emerge and hoped that the US government would rethink. Recognizing the importance of countries working together to promote development, I think this is the best way to become a true "world citizen."Market news: Musks xAI company plans to raise about US$20 billion in a financing round.Conflict situation: 1. Ukrainian top commander: Russia tried to use air strikes as a cover to increase ground attacks, but was repelled by Ukraine. 2. Ukrainian Air Force: Russia launched more than 103 drones in the night attack on Ukraine. 3. Local officials said Ukraine launched an attack in the Belgorod region of Russia, killing two people. 4. The local governor said that Russia launched an attack on the Dnipropetrovsk region of Ukraine, killing one person and injuring eight people. Peace talks: 1. Trump: ① The situation between Russia and Ukraine is gradually becoming clear, and they are "very close" to reaching an agreement. ② Ukraine is unlikely to join NATO. ③ Ukraine has not yet signed the rare earth agreement and hopes that the agreement can be signed immediately. ④ It is foreseeable that the United States will conduct commercial cooperation with Ukraine and Russia after reaching an agreement. 2. Russian Foreign Minister: Russia is "ready to reach an agreement on Ukraine." 3. Russian Presidential Assistant Ushakov: Russia and the United States will continue to maintain active dialogue. 4. Russian Presidential Assistant: Putin discussed the possibility of resuming direct negotiations between Russia and Ukraine with the US envoy. 5. The differences between the United States, Europe and Ukraine are clear. The documents show that European countries and Ukraine have raised objections to some of the US proposals to end the Russia-Ukraine conflict. 6. Market news: As part of the peace agreement, the United States asked Russian President Putin to abandon the demilitarization requirement. Other situations: 1. President of Hungarys OTP Bank: We hope to return to all business areas in Russia after the (Russia-Ukraine) conflict ends. 2. Ukrainian President Zelensky: US ground forces are not necessary for Ukraine. 3. Trump said Crimea will remain in Russia, Zelensky: Never recognize it. Agreeing with Trumps view, Crimea cannot be recovered by force. 4. NATO Secretary-General Rutte met with Trump and senior US officials to discuss defense spending, NATO summit, and the Ukrainian conflict.Rising global trade risks, overall policy uncertainty and the sustainability of U.S. debt top the list of potential risks to the U.S. financial system, according to the Federal Reserves latest financial stability report released on Friday. This is the first time the Fed has conducted a semi-annual survey on financial risks since Trump returned to the White House. 73% of respondents said that global trade risks are their biggest concern, more than double the proportion reported in November. Half of the respondents believe that overall policy uncertainty is the most worrying issue, an increase from the same period last year. The survey also found that issues related to recent market turmoil have received more attention, with 27% of respondents worried about the functioning of the U.S. Treasury market, up from 17% last fall. Foreign withdrawals from U.S. assets and the value of the dollar have also risen on the list of concerns.

GBP/USD fell to levels not seen in two years due to recession fears and pre-NFP instability

Alina Haynes

Sep 02, 2022 14:44

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The U.S. labor market report for August is the most crucial report of the month. After hitting a two-year low the day before, the British pound stabilized in the 1.1540-1.1550 region throughout Friday's Asian session. Despite impending recessionary fears in the UK, the Cable pair typifies the typical pre-NFP fluctuations.

 

As Bloomberg reports, "the United Kingdom is already in a recession, and inflation is likely to reach 14% later this year," citing BCC data. Unless the next prime minister takes "urgent" action to decrease skyrocketing energy bills, a coalition of groups called "End Fuel Poverty" has warned that the number of UK families in fuel poverty would more than double in January, to at least 12 million.

 

British Foreign Minister and potential future Prime Minister Liz Truss recently stated in a late Wednesday Sun article that she will provide "immediate support" to ensure that households do not incur excessive heating costs this winter.

 

In addition to high US Treasury yields, improved US data and hawkish Fed predictions acted as a drag on the GBP/USD exchange market.

 

President of the Atlanta Fed, Raphael Bostic, meanwhile, has said that the Fed still has a "long way" to go before inflation reaches 2%. As other conservative US central bankers have said, "Restoring price stability is our top aim," so has Lory Logan, the recently appointed president of the Dallas Fed.

 

The statistics for August showed that the US ISM Manufacturing PMI came in at 52.8, beating market expectations of 52.0. As a plus, the final S&P Manufacturing PMI index for August was 51.5, up from 52.2 in July and above the consensus estimate of 51. Similarly, the number of initial claims for unemployment insurance in the United States fell to 232k from 248k in the prior week and 237k the week before that. In addition, during the second quarter (Q2), Unit Labor Cost climbed by 10.2% QoQ, which was somewhat higher than the predicted growth of 10.7%; nevertheless, Labor Productivity fell by 4.1% QoQ, which was lower than the expected decline of 4.5% and the decrease of -4.7% in the first quarter.

 

Despite a mixed day on Wall Street, 10-year US Treasury rates rose to their highest levels since late June. And most significantly, the two-year equivalent hit a 15-year high. The CME's FedWatch Tool now predicts a 72% chance of a rate hike of 75 basis points in September, up from about 69% previously.

 

On the other hand, the Bank of England's (BOE) Decision Maker Panel survey of CFOs showed on Thursday that British companies' expectations for CPI inflation rose in August. Also, as reported by Reuters, a monthly survey by Citi and YouGov revealed on Wednesday that British people' expectations for average inflation over the next five to ten years skyrocketed to a record-high 4.8% in August, well over the Bank of England's inflation aim of 2%.

 

Expectations for August's Nonfarm Payrolls (NFP) and Unemployment Rate reports have dropped from 528K and 3.5%, respectively, to 300K and 3.5%, which is likely to cause worry in the markets. If the jobs report shows improved numbers, the possibility of future US dollar strength cannot be ruled out.

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