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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.

USD/JPY continues Powell-led declines to fresh 14-week low, BOJ's Kuroda, and US PCE Inflation in the horizon

Daniel Rogers

Dec 01, 2022 15:22

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As Tokyo opens on Thursday, USD/JPY bears take advantage of the weakening US Dollar to mark the lowest level in more than three months near 137.30. In addition to falling US Treasury bond yields and a risk-on market mentality, the recent depreciation of the Yen could be attributed to a weaker yen.

 

Fed Chair Jerome Powell made his first public appearance since the November Federal Open Market Committee (FOMC) meeting by speaking at the Brookings Institution about the economic outlook, inflation, and employment. The official noted that it makes sense to reduce the rate of interest rate increases and speculated that this might occur as soon as the December meeting. Lisa D. Cook, a member of the Federal Reserve Board of Governors, praised the inflation figures as evidence that the Fed will likely take fewer steps in the future.

 

Following Powell's speech, market bets supporting a 50 basis point (bps) rate hike by the Federal Reserve in December increased from 69.9% prior to the speech to over 75%, resulting in a depreciation of the US Dollar and a rise in Treasury yields, while equities appreciated.

 

As a result, the US Dollar Index (DXY) shattered a three-day uptrend on Wednesday, exhibiting the steepest daily fall in a week and the largest monthly decline in 12 years. Notable is the fact that Wall Street benchmarks responded favourably to Fed Chair Yellen's dovish remarks, while 10-year Treasury bond yields reversed early gains to end November on a negative note near 3.61 percent.

 

In addition to Fedspeak, the poor US statistics and optimism on China's Covid situation also weighed on USD/JPY prices. Among these, the US ADP Employment Change received the most attention, as its November result of 127K constituted the lowest readings since January 2021, compared to the 200K expected and 239K previous results. In addition, China reported just over 38,000 daily cases of Coronavirus on Tuesday, which was reported on Wednesday, indicating the second consecutive day of declining virus levels after the record high was updated. The gradual easing of virus-driven activity restrictions in major cities such as Zhengzhou, Guangzhou, and Chongqing looked to have favored Yen pair sellers.

 

Moving forward, the Fed's favored inflation measure, namely the US Core Personal Consumption Expenditure (PCE) Price Index for October, which is forecasted to increase to 5.0% YoY in October from 5.1% in September, will be key for near-term USD/JPY fluctuations. The US ISM Manufacturing PMI for November will also be significant, with a predicted reading of 49.8 compared to 50.2 earlier. Recent rumors regarding the possible tightening of monetary policy by the Bank of Japan (BOJ) in 2023 are the focal point of Governor Haruhiko Kuroda's address today.


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