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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.

NZD/USD fades US inflation-driven increases below 0.64 in anticipation of China trade data

Alina Haynes

Jan 13, 2023 15:04

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During a lackluster Asian session on Friday morning, the NZD/USD consolidates the US inflation-driven advances within a range of 0.6390 to 0.6385. This underscores traders' nervousness ahead of China's December trade data and the initial January readings of the US Michigan Consumer Sentiment Index (CSI).

 

Notably, the weaker December US Consumer Price Index (CPI) fueled expectations of easy rate hikes and depressed the US Dollar the previous day. However, recent reports that the Fed's easy strategy could push the RBNZ to reverse its hawkish stance appeared to weigh on the NZD/USD exchange rate.

 

However, the US CPI for December met expectations of 6.5% YoY, compared to 7.1% before. In addition, the CPI excluding food and energy maintained the market consensus of 5.7% YoY, as opposed to the previous readings of 6.0%. Notable is the fact that the CPI MoM had its first negative result since June 2020, with a -0.1% figure for the designated month, compared to forecasts of 0.0% and the prior figure of 0.1%.

 

Fed Fund Futures related to the policy rate implied a nearly 100 percent chance of a 0.25% Fed rate hike in February, whilst the odds favoring a 50 bps rate hike in the same month fell to 8%.

 

Notably, President of the Federal Reserve Bank of Philadelphia Patrick Harker was the first to predict mild rate hikes after the US CPI, which weighed on the US Dollar. In a similar spirit, Thomas Barkin, president of the Federal Reserve Bank of Richmond, remarked that it "makes sense" for the Fed to take a more cautious approach to reducing inflation. However, James Bullard, chairman of the Federal Reserve Bank of St. Louis, emphasized that the most likely scenario is inflation continuing longer than 2%, thus the policy rate will need to be higher for a longer period of time.

 

Wall Street was able to close in the black despite these maneuvers, while 10-year and 2-year Treasury bond rates reached monthly lows. Notable is the fact that S&P 500 Futures register small gains while 10-year US Treasury rates remain under pressure near 3.44 percent.

 

In the absence of substantial local data or events, the NZD/USD exchange rate may remain muted until China and the United States announce their most significant numbers. If the anticipated data can convince policy hawks in Beijing and Washington, the New Zealand currency could extend its recent slide.


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