The British historian Lord Acton famously said, “power corrupts and absolute power corrupts absolutely.” The American response is a system of checks and balances. The Federal Reserve represents a concentration of power that became abundantly clear during and after the Great Financial Crisis.
Amid light news, the US dollar’s recent gains have pared slightly. Attention turns to the US, were several Fed officials speak, October housing starts/permits will be released, and then later in the session, traders will peruse the minutes from last month’s FOMC meeting.
The IMF gave G20 leaders some bad news in Turkey: they are not doing enough to lift growth. The G20 has not implemented enough of their previous commitments and their goal of increasing G20 GDP by US$2 trillion by 2018 is falling short by about US$4 trillion. The problem is that G20 leaders are stuck in a business-as-usual mindset.
There has been a lot made about Russia’s ‘sudden’ pivot to the Asia Pacific, but is it all much ado about nothing? In the context of the US rebalance to Asia and heightened rhetoric over Ukraine, the policy is not so much a pivot to the Asia Pacific as intensifying Sinocentrism in Russia’s Asia policy.
The prospect of the Fed rate hike next month while many other countries consider providing more stimuli continues to underpin the dollar. Corrective downticks remain shallow and brief. The euro slumps to near seven-month lows just below $1.0645. The greenback posted a big outside up day against the yen yesterday, and follow through buying today is putting it within spitting distance of a three-month high.
Taiwanese President Ma Ying-jeou met with Chinese President Xi Jinping in the first ever meeting between the leaders of the two countries on 7 November 2015 in Singapore.
The timing of the meeting is interesting and controversial. President Ma is an unpopular president whose term is about to end. His party, the Kuomintang (KMT), is widely predicted to lose both the next presidential and parliamentary elections. Many see Ma’s decision to meet Xi as an attempt to secure his historical legacy and provide a boost to his struggling party.
On 29 October 2015, a United Nations Convention on the Law of the Sea (UNCLOS) Tribunal issued the highly awaited Award on Jurisdiction and Admissibility in the Philippines–China arbitration case. The interim award sets up a climactic final ruling in 2016.
After half a decade of low growth, global organizations continue to represent the victors of World War II, not the economic powerhouses of the 21st century. However, change is in the air. Following a series of coordinated terror attacks in Paris, the Islamic State of Levant left the “city of light” in dark. Only hours later, world leaders began the G20 Summit in Antalya, Turkey.
Investors have mildly responded to the tragic developments in Paris. Equities tumbled in Asia, with the MSCI Asia-Pacific Index shed more than 1%, and the euro briefly pushed below $1.07. The dollar fell to almost JPY122.20. US Treasury yield slipped around 3 bp. However, the markets have since stabilized.
Nous Sommes Paris: The attack in Paris is tragic and reprehensible. Our thoughts and prayers are with the victims and the people in France. There are several political and economic consequences, aside from the tighter security and elevated alertness. The attack overshadowed other issues at the G20 meeting. On one hand facing terror, investors often reduce risk. At the same time, officials often provide reassurances that they have the will and means, to address any liquidity needs.
