A Wild Ride into the Weekend


Tomorrow could be among the most challenging sessions of the third quarter.  The focus is primarily on Japan and Europe, but the US reports its first estimate of Q2 GDP.  After a six-month soft patch that heightened fears in some quarters that the world’s largest economy was headed for a recession, the US economy appears to have returned to trend growth.  It enjoyed good momentum as the quarter wound down, and currently, Q3 GDP is also projected to be above trend. 

Trump Leads the Republicans to Splitsville on Trade


No issue better illustrates the agony and self-inflicted wounds in the Republican Party than the Trump-inspired clashes over the future of US trade policy.  While the Democratic Party has been wracked by deep divisions over trade for three decades — fuelled by opposition from key constituents such as labour and environmentalist organisations — Republicans have been fairly united in the belief that international trade agreements represented an extension of domestic doctrines of deregulation and market competition to the international level.

The Link between Outward-Looking Trade Policies and Rapid Economic Growth


Since trade started being emphasized as a locomotive of growth, export promotion trade policies have become a popular option for countries in search of higher economic growth rates. East Asian countries in particular have witnessed a distinct success in terms of rapid economic growth after the adoption of outward-looking trade policies.

Looking Further Out for Fed Action Clues


After reversing lower yesterday after the FOMC statement, the US dollar has continued to move lower against the major currencies, save sterling.  While the market is not fully confident of a rate cut by the Reserve Bank of Australia, indicative pricing in the derivative markets suggest a UK rate cut has been fully discounted (and a new asset purchase plan may be announced).

International Investment Law’s Future Includes Asia


European and North American capital exporting countries have shaped international investment law for most of its history. They pushed for the customary international minimum standard of protection, forged the classical model of bilateral investment treaties (BITs) and now drive the present recalibration of international investment law.

Despite counter-proposals from the ‘South’ over decades, the making of international investment law has been essentially a transatlantic enterprise with the ‘North’ as predominant global rule-maker.

The Fed, on Cue, Meets Expectations


The Federal Reserve met market expectations fully.  It upgraded its assessment of the economy, recognized that the near-term risks had diminished, and remained committed to normalizing monetary policy.  There was one dissent from the steady stance, and it the KC Fed President had already tipped her hand.

Fiscal Stimulus Questions Force Abe’s Hand


As uncertainty over Japan’s fiscal stimulus roiled the yen and domestic equities, Prime Minister Abe was forced to announce his fiscal intentions earlier than he initially intended.  The JPY27 trillion (~$265 bln) package.  

The details are far from clear, which may help explain why the dollar is in the middle of the two yen range (~JPY104.65-JPY106.55).  Note the high for the week was set on Monday near JPY106.70.  An unspecified part of the spending will be included in fall supplemental budget, which Japan regularly introduces. 

Expressing the Fed’s Leadership through its Statement


The Federal Reserve’s two-day meeting concludes today.  There is little doubt that it will stand pat.  There is not press conference afterward, so the statement is the only thing investors will get.  The statement is important.  We argue that the FOMC statement is the clearest expression of the views of the Fed’s leadership.  The minutes are more comprehensive they dilute the signal from the Fed’s leadership, and it conflates the difference between voters and non-voters and between the Governors and regional Presidents. 

Hillary Clinton, the TPP, and the Environment


Hillary Clinton and many of her fellow Democrats meeting in Philadelphia hope to show the party unity arguably lacking when the Republicans gathered in Cleveland.  A sticking point to a unified Democratic Party, however, has been the Trans-Pacific Partnership (TPP), one of the most contentious topics of debate between supporters of Clinton and erstwhile rival Bernie Sanders.

How did the Yen Become So Attractive?


The strength of the Japanese yen is the main development in the foreign exchange market today.  It has gained nearly 1.5%, as short-term participants grow skeptical of the kind of stimulus that had driven the yen around 7.5% lower between July 8 and July 21’s six-week high.  The pendulum of market sentiment has swung wildly.