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China’s Central Bank Sets Yuan Fixing Weaker Than Estimated By Bloomberg

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© Bloomberg. A man rides a bicycle past the People’s Bank of China (PBOC) headquarters in Beijing, China, on Friday, June 7, 2019. China’s central bank governor said there’s

(Bloomberg) — China’s central bank set its daily yuan fixing slightly weaker than analysts expected after officials earlier acted to restrain the currency’s rally.

The People’s Bank of China’s reference rate was fixed at 6.7126 per dollar on Monday, compared with the average estimate of 6.7073 in a Bloomberg survey. On Saturday, the PBOC moved to make it cheaper to bet against the currency. The was down 0.7% at 9:17 a.m.

The yuan surged about 1.6% on Friday when the currency traded for the first time this month following National Day holidays, extending its best quarterly advance in 12 years. A recovering economy, a hefty yield premium in sovereign debt over Treasuries and the prospect of a U.S. presidential victory by Democrat nominee Joe Biden are all providing tailwinds for a currency that earlier this year was near its lowest level since 2008.

Effective Monday, financial institutions no longer need to set aside cash when purchasing foreign exchange for clients through currency forwards, according to a statement from the PBOC on Saturday. Back in September 2017, when the PBOC similarly cut the cost to zero following sharp gains, the yuan slumped about 2.5% in the next three weeks.

Banks previously had to hold 20% of sales on some foreign exchange forward contracts, a move imposed two years ago when the currency slumped toward 7 per dollar.

The yuan is the top performer among Asian peers in the past three months through last week, climbing about 4.5% against the dollar. It closed on Friday at about 6.69 per dollar, its strongest level since April 2019.

The reference rate is decided based a formula that takes into consideration the onshore yuan’s official close at 4:30 p.m. on the previous trading day and major currencies’ moves overnight.

©2020 Bloomberg L.P.

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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Dollar-Yen Undermined by Stimulus Hopes

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USD/JPY PRICE OUTLOOK: US DOLLAR COULD FALL VS JAPANESE YEN AS FISCAL STIMULUS DEAL STEERS GREENBACK LOWER

The US Dollar has faced heavy selling pressure throughout Tuesday’s trading session. Broad-based US Dollar weakness has weighed negatively on the DXY Index and just pushed the benchmark below a major support zone. USD downside largely follows rekindled fiscal stimulus optimism after Democratic House Speaker Nancy Pelosi conveyed an upbeat tone earlier today on the possibility that a coronavirus aid package can be reached before the November 2020 election.

Pelosi, who will speak with Treasury Secretary Steven Mnuchin again this afternoon in an attempt to finalize legislative text, stated that the Trump administration has ‘come a long way toward reaching an agreement.’ Reinvigorated fiscal stimulus hopes thanks to encouraging remarks from Pelosi exacerbated US Dollar downside and helped steer spot USD/JPY price action to session lows.

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USD/JPY PRICE CHART: DAILY TIME FRAME (01 JUL TO 20 OCT 2020)

USD JPY Price Chart USDJPY Dollar Yen Technical Forecast

The intraday reversal by USD/JPY also happens to correspond with another rejection of its 50-day simple moving average. This highlights growing potential for further Dollar-Yen weakness, which could motivate USD/JPY bears to eye another retest of the 105.00-handle and month-to-date lows. Breaching this technical support level could see USD/JPY prices extend even lower toward the 104.00-mark. Notable hurdles still stand in the way of politicians being able to break the ongoing impasse over passing a comprehensive coronavirus aid package prior to the upcoming election, however.



of clients are net long.



of clients are net short.

Change in Longs Shorts OI
Daily -1% -16% -8%
Weekly -10% -5% -8%

A last-minute breakdown in fiscal stimulus negotiations due to differences on aid to state and local governments, or failure to garner enough support in the Republican-controlled Senate, pose upside risks to USD/JPY price action. That said, eclipsing the bearish trendline extended through the series of lower highs since early July might open up the door for USD/JPY bulls to target the 106.00-price level before setting their sights back on August highs.

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— Written by Rich Dvorak, Analyst for DailyFX.com

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Pound Cuts Gains as U.K. PM Drags Heels on Resuming Brexit Talks By Investing.com

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© Reuters.

By Yasin Ebrahim

Investing.com – The pound cut its gains against the greenback Tuesday, as the U.K. continues to dig in its heels over restarting trade talks with the EU and parts of Britain go into lockdown to curb virus infections.

fell 0.05% to $1.2940.

U.K. Prime Minister Boris Johnson reportedly told the Greek prime minister Brexit talks will remain paused until the EU changes its stance on the discussions.

“He reaffirmed that the EU have effectively ended those negotiations by stating they did not want to change their negotiating position,” Johnson’s spokesman said following the call with Prime Minster Kyriakos Mitsotakis. “Should the EU fundamentally change their position, then the UK would be willing to talk on that new basis.”

Issues including fishing access and state aid rules have held up progress on talks.

EU negotiator Michel Barnier who just a day earlier extended an olive branch after suggesting that the bloc was committed to intensifying talks called on the U.K. to “make the most of the little time left” with just months ago until the end of the transition period at year-end.

Without a trade deal, the U.K. will trade with the EU on World Trade Organization trade terms, which many have said will hurt growth, particularly a time when Britain has resumed some lockdown to curb a surge in cases.

Johnson confirmed Greater Manchester would be going into the highest level of lockdown – Tier 3 – from 12.01am on Friday morning.

Coronavirus infections in the U.K. soared by 21,330 since Monday, the highest one-day rise since June 5.

The prime minister also had to contend with a widely expected defeat in Parliament as his internal markets bill, which seeks to undermine parts of the Brexit withdrawal agreement, was voted down.

Sterling remains vulnerable until there is meaningful progress on talks, analysts have warned.

“A true breakthrough would be the news that an agreement has been reached on the issue of fishing. That would be more suited to justifying strong Sterling appreciation as this is one of the real stumbling blocks in the negotiations. Until that is reached, I would remain cautious as a Sterling bull,” Commerzbank (DE:) strategist Thu Lan Nguyen said.

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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Trump Vs. Biden on Economies and Markets

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Trump versus Biden Policies Overview

  • The November 3 elections are around the corner, and the state of the economy thanks to the coronavirus pandemic is at the top of voters’ minds.
  • While a Trump administration would likely continuation of lower tax rates, a Biden administration might bring about the end to trade wars.
  • The composition of the Congress matters greatly, insofar as a mixed result could bring more gridlock to Washington, D.C. – regardless of whoever is the president.

A decade after The Great Recession, Americans are dealing with the worst economy since The Great Depression. Onset by the coronavirus pandemic, US growth cratered in the second quarter of 2020, with inconsistent evidence emerging of a widespread V-shaped recovery in the third quarter.

Now past the Labor Day holiday, we are officially in the US presidential election season, and the state of the economy amid the coronavirus pandemic is at the top of voters’ minds as they weigh sending back to the White House Republican Donald Trump, or Democratic nominee and former Vice President Joe Biden.

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Depending upon the outcome of the November presidential election, the US economy could take very different tracks. While there may be some agreement in terms of trade or infrastructure, Trump and Biden diverge on nearly every other economic policy facet – from taxes, to jobs, to the coronavirus pandemic recovery itself.

We outline below key areas and explain how we see them differ in a Trump or a Biden administration.

Taxes

Trump – Tax rates have been cut during the first Trump term, both at the corporate and individual level. Comments made during the campaign suggest that Trump would seek further cuts to both corporate and individual tax rates to help spur the economy’s recovery from the coronavirus pandemic.

Biden – Tax rates would be poised to go higher under a Biden administration, both at the corporate and individual level. But at the individual level, the Biden plan calls for an increase of 0.4%, while the top tax bracket would jump nearly 13%, back to levels seen under Obama.

Infrastructure

Trump – “It’s infrastructure week!” proved a well-worn quote during Trump’s first term, but nothing materialized despite repeated promises for a robust infrastructure spending bill. Trump continues to beat the drum, saying that he’d like to see a $1 trillion infrastructure program passed; the holdup may be Senate Republicans.

Biden – The Democratic challenger has released a $2 trillion infrastructure spending program, aimed at spurring development and investment in carbon-neutral and green energy solutions over four years. The plan was enhanced from its original $1.3 trillion spend over 10 years, insofar as increased spending on a shorter time horizon will enhance the US economy’s recovery from the coronavirus pandemic.

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Jobs/Coronavirus Response

Trump – The White House has been pushing for a skinny fiscal stimulus boost after the $2 trillion used to fund the CARES Act has been depleted. Against a robust automatic unemployment benefits program (seeking $300 per month, down from $600 in the CARES Act), the Trump campaign has proven hesitant about leaning into more deficit spending as the economy, particularly the labor market, has produced above-expectation results in the second half of summer 2020. Likewise, the Trump campaign has proven ambivalent about increasing federal spending to subsidize damaged tax revenue streams at the local and state level.

Biden – The economy will receive much more fiscal support under a Biden administration, insofar as plans outlined thus far suggest that Biden would seek to extend the $600 per month unemployment benefits program established vis-à-vis the CARES Act. Furthermore, a Biden administration would likely be more willing to use the federal purse to help localities and states that have seen their tax bases depleted thanks to reduced income tax and sales tax revenues.

Trade

Trump – The US-China trade warwas a hallmark of Trump’s first term. While there have been mixed signals about compliance on both sides of the deal, it is likely that a second Trump term would see the US-China trade war deepen. The trade conflict has started to take on a militaristic aspect in the South China Sea, and it would seem likely that a second Trump term would result in a rekindled US – China trade aggressions, as well as further tensions with allies like the European Union, Japan, and South Korea.

Biden – While a Biden administration would likely take a similarly hard line on China, there would likely be moderation in the US-China trade war, with some efforts at removing tariffs and trade barriers that were constructed during the first Trump term. But even if the US-China trade war doesn’t revert back to its pre-Trump status (Biden is truly starting to sound more like Trump on China), it would be likely that trade relations are normalized with allies like the European Union, Japan, and South Korea.

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Conclusion

The composition of Congress will also shape a future US economy. A Biden administration with a Democratic House and a Republican Senate will get little accomplished. Similarly, a Trump administration with a Democratic House and a Republican Senate – what we have now – will get little accomplished. Under both, even in a split Congress, it is highly likely that the federal deficit continues to rise, bringing the deficit hawks out of the woodwork.

Unless both chambers of Congress align with the president’s party after November 3 – either Biden has a Democratic House and Democratic Senate, or Trump has a Republican House and a Republican Senate – we will be stuck with gridlock, making the US economy’s recovery from the coronavirus pandemic all

the more anemic.

— Written by Christopher Vecchio, CFA, Senior Currency Strategist





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