While the US jobs report has been among the most important economic releases in the monthly cycle, it takes on even more significance in the run-up to the September FOMC meeting. The dollar has been trading in a narrow range.
The international trading system is at a crossroads. While the Doha Round of WTO negotiations remains deadlocked, new trade rules are being called for to adjust for new realities, such as the expansion of global value chains (GVCs). This means for the first time since the establishment of the WTO in 1995, regionalism has prospered over multilateralism, with the parallel emergence of three mega-regional trade negotiation platforms. With this in mind, China must reconsider its approach to negotiating trade agreements.
There are three main talking points today: 1) The divergence in the trajectory of monetary policy, illustrated by Atlanta Fed’s Lockhart yesterday, and to be tested today by the ADP private sector employment estimate; 2) The July service sector PMIs; and 3) The IMF’s update on the yuan’s inclusion in the SDR
The Federal Reserve could be six weeks away from raising rates. The FOMC statement from the end of last month appeared to have lowered the bar of a move. It called the recent improvement in the labor market as “solid” and wanted to see “some” more.
The White House’s effort to hammer the Trans-Pacific Partnership (TPP) agreement in Maui failed. As time is running out for President Obama’s legacy achievement, both Washington and Beijing are reassessing their options.
Last week, Pacific Rim officials met on the island of Maui, Hawaii, to conclude the Trans-Pacific Partnership (TPP) agreement. In addition to trade ministers from 12 countries, the meeting included 650 officials, lobby groups and other stakeholders.
However, the talks failed.
After fierce resistance from Australia and several Asian countries, the United States is again making an aggressive move to get the Trans-Pacific Partnership (TPP) approved in all member states.
Narrow ranges in the foreign exchange market continued for the most part, and the US dollar is a little softer. The Reserve Bank of Australia did not talk the Aussie lower, and the data were better than expected. This sent the Australian dollar sharply higher. Its 1.25% gain is the biggest in two months. This coupled with gains in Chinese stocks (Shanghai Composite + 3.7%) and firmer commodity prices, including oil, are helping to lift the dollar-bloc currencies more generally.
In a crippling blow to Barack Obama’s Trans-Pacific Partnership trade agreement, talks between nations in the partnership have collapsed.
All 12 nations in the pact besides the U.S. failed to reach an agreement late last week, causing Obama and Secretary of State John Kerry to scramble over the weekend. The pact is originally designed to allow more trade between the U.S., Mexico, Canada, and many other nations throughout Asia.
The US dollar is mostly confined to the pre-weekend trading ranges as participants prepare for this week’s big events, which include the BOE meeting, minutes and new forecasts, and the US jobs report. The main exception is the Canadian dollar, which remains under pressure following the unexpected contraction in May, and the weekend call for national elections in October. The Canadian dollar is off nearly 0.5%, with the US dollar at new multi-year highs. Oil prices are at new six-month lows and they are taking a toll.
Asia accounts for more than 50 percent of the world’s automobile production, 62 percent of liquid display screen, 86 percent of smart phones and 100 percent of digital cameras. Much of this production is based on production networks: that is, value chains that crisscross the region, with the various stages of the production of each good taking place in different countries, depending on the comparative advantage of each.
