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Market Review 13-12

Market Review 13-12

Forex News

British PM May survives party confidence vote but Brexit deal still teetering

From: Reuters.com

British Prime Minister Theresa May survived a confidence vote by the Conservative Party on Wednesday, but a mutiny by more than a third of her lawmakers indicated parliament was heading toward deadlock over Brexit.

While 200 Conservative lawmakers voted in support of May as leader, 117 dissented, indicating opposition not only from several dozen supporters of a hard Brexit but also from many more pragmatic lawmakers – and signaling that she was no nearer to passing her EU divorce agreement.

It was not the robust affirmation she needed as she heads to Brussels on Thursday to ask the other 27 EU leaders, who have made room for her at a summit, for clarification of the deal to reassure the doubters.

On Monday, May had canceled a parliamentary vote on her deal, struck after two years of negotiations and designed to maintain close future ties with the bloc, after admitting it would be heavily defeated.

With Britain due to leave the EU on March 29, parliament’s opposition has suddenly opened up possibilities including a potentially disorderly exit with no deal or even another referendum on membership.

Speaking in Downing Street after the vote, May said she would listen to those who had voted against her and seek legal assurances on the most controversial part of her deal – an insurance policy to prevent a hard border between EU member Ireland and the British province of Northern Ireland. Many in her party fear that these “backstop” measures could last indefinitely.

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China’s currency moves will be the best measure of how well trade talks are going between the US and China

From: CNBC.com

  • China’s currency has been firming against the dollar since just before President Donald Trump and China President Xi Jinping met in Buenos Aires, and strategists believe the behavior of the renminbi or yuan could be the best barometer for trade talks.
  • China’s central bank sets a daily exchange rate for the yuan based on recent prices, and allows trading against the dollar in a band that could be as much as 2 percent above or below that level.
  • There are signs the central bank is taking steps to steady the currency, and strategists said it would not be a good sign for trade talks if the yuan suddenly gets more volatile or falls sharply against the dollar.

The way China’s currency moves against the dollar could be the best measure of how well U.S.-Chinese trade talks are proceeding.

Strategists say the fact the renminbi, also known as the yuan, has steadied against the dollar and is edging higher is one of a number of positive signs that show the Chinese are serious about the trade talks.

The currency has been a point of contention between China and the Trump administration, which has said in the past it was intentionally weakened to help Chinese exports.

“People think it’s being politicized to help facilitate better trade talks. When the dollar was bid, the RMB did not weaken that much, and today the dollar is softer, the RMB is not strengthening that much. The idea is officials are trying to dampen volatility to help facilitate the trade discussions, ” said Marc Chandler, chief market strategist at Bannockburn Global Forex.

Chandler said the renminbi, also known as the yuan, appeared to become steadier against the dollar, just ahead of the dinner meeting between President Donald Trump and China President Xi Jinping in Buenos Aires Dec. 1. The two leaders agreed to a trade truce and agreed to hold off on further tariffs, while they negotiate for a 90-day period. China also agreed to drop new tariffs on U.S. autos and buy U.S. soy beans.

“I think the negotiation is a real negotiation now. It seems like China is trying to deliver something to the negotiating table that’s going to keep the momentum going. They’re trying to deliver something on the currency,” said Jens Nordvig, CEO of Exante Data.

China’s central bank sets a daily exchange rate for the yuan based on recent prices, and allows trading against the dollar in a band that could be as much as 2 percent above or below that level. The currency began to move noticeably lower against the dollar as trade tensions rose in the second quarter, but recently China has been deliberate in keeping it from falling.

“It suggests very strongly they do not want to have the currency weaker, and they want to give it a strengthening bias. That’s something that is part of the negotiations, and I think it was discussed at the dinner,” said Nordvig. “At a minimum, we will get stability and quite likely some recovery from the Chinese perspective…That could start to feed into the dollar on a broad basis. It has not done so yet. If these negotiations, in a more convincing way, show progress, I think that’s more likely.”

The dollar/yuan pair has moved higher, meaning the dollar gained against the yuan, most noticeably since June when the market began pricing in trade tensions. So far this year, the dollar is up 6 percent, and it could reverse that move.

“I feel strongly this negotiations has momentum for now. If the negotiation turns out to be successful that takes the tariff premium out of the dollar. If you have a successful negotiation, it will come out,” said Nordvig. “For the Chinese currency, it’s something in the region of 6 to 8 percent. If you translate it on a global basis, it’s going to be less meaningful than for China and countries that are linked to China.”

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Stock Market News

Huawei Troubles Spell Opportunity for Samsung as 5G Nears

From: Bloomberg.com

Growing security concerns surrounding Huawei Technologies Co. may help Samsung Electronics Co. challenge the Chinese behemoth in the market for fifth-generation wireless communications, an executive at the South Korean giant said.

While Samsung remains the world’s biggest smartphone and semiconductor maker, Huawei dominates networking by a large margin. But its market position is under threat as one country after another blocks the use of its 5G products, amid concerns they could be used to spy for the Chinese government. Huawei denies any role in espionage.

“Strategically these concerns help us grab more market share,” S. Abraham Kim, a vice president at Samsung’s mobile division, said Wednesday at a conference in Seoul. “Huawei has held dominance in the network market since the fourth-generation LTE era, but we’re ahead on 5G technology that goes into smartphones.”

Samsung said Kim’s personal views on the networks market don’t reflect those of the company as he is part of the mobile phone business.

“Samsung Electronics has been working in the networks industry for decades building trust with our partners,” the company said in an emailed statement. “Our priority is working with our partners across the world to unlock the power of 5G. That is why we have made substantial investments in 5G technology since the mid 2000s.”

Samsung plans to release a 5G-capable handset along with a bendable-screen phone next year, and sees those gadgets as its best shot at reviving sales that have slowed as consumers wait longer to upgrade their smartphones.

But technical challenges remain, Kim said. 5G signals can get obstructed depending on how a phone is held, so that means the need to cram more antenna modules around a phone’s already limited real estate, alongside a large battery. Samsung is now studying how a device’s innards can be split into two layers while still minimizing overall thickness, Kim said.

Heat poses another challenge because 5G transmits a lot more data and consumes more power, potentially making the phone too hot to hold. Samsung is working to cap the temperature at just over 40 degrees Celsius, Kim said.

Huawei recently replaced Apple Inc. to become the world’s second-biggest smartphone maker and is narrowing the gap with Samsung. But concerns about the Chinese company’s global business have escalated since Chief Financial Officer Meng Wanzhou was arrested on allegations she conspired to defraud banks and violate U.S. sanctions on Iran. Meng was released on bail Tuesday but faces extradition to the U.S.

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S&P Global: Brexit turmoil won’t automatically push UK rating down

From: FXstreet.com

The US-based rating agency – S&P’s lead global sovereign analyst Roberto Sifon-Arevalo told Reuters on Wednesday that the UK’s AA credit rating would not be affected by the leadership change, but a hard Brexit could have a major impact on its credit rating.

Key Quotes (via Reuters):

“A change of leadership would be an important development for us to take into account but I wouldn’t necessarily characterize it as an automatic rating action.”

“We would need to analyze what it actually means for future policymaking: who is coming after and what are the policies.”

S&P’s big worry for the UK rating remains a drastic move away from the EU with a so-called ‘hard Brexit’. Its economists have done a set of economic forecasts on that scenario.

“That showed an important hit to the economy that is likely to have an impact on the rating.”

“Taking away the uncertainty of Brexit from the equation has to be positive (for the rating).”

“But given the degree of support that Brexit had, it would be important to see what the social reaction is to it.”

“Like in France, you do have a super-charged environment where people are willing to go and protest on the streets which puts a lot of restrictions on policymakers.”

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Cryptocurrency News

Number of Crypto Users Increase Despite 85% Market Correction

From: Livebitcoinnews.com

This year has not been particularly kind to BTC, especially when compared with 2017, the year of the bitcoin boom. Last December, cryptocurrency enthusiasts and traders everywhere were treated with a special Christmas treat when bitcoin rose to just under $20,000 during the final weeks of the year. After a series of extensive price spikes throughout 2018, it appeared bitcoin had finally hit its mark.

But just a month later, bitcoin began to take a nasty fall, and that fall has never let up. At press time, bitcoin has lost virtually 85 percent of its previous value, and today, it’s trading for just over $3,400.

People Still Love Their Crypto

But that doesn’t mean people gave up on bitcoin and cryptocurrency altogether. A new report issued by the Cambridge Center for Alternative Finance suggests that the number of “newbies” entering the crypto space in 2018 practically doubled from the numbers listed for 2017. Despite bitcoin’s record (and consistent) drops, BTC and crypto users shot up more than anyone likely anticipated.

The authors explain:

“Conforming with popular narratives, survey data indicates that most users – both established as well as new entrants – are individuals and not business clients. Individuals can by hobbyists, retail investors, consumers or users seeking a better investment or payment alternative… Growth rates were at their highest in 2017, and the number of new users’ accounts as well as ID-verified users continued to rapidly grow in 2018 as well.”

Will Bitcoin Return to Greatness?

The data suggests one hugely positive thing: that bitcoin is potentially in line for another rally. If users continued to flock to bitcoin even during times of extreme crisis, that could mean recovery is on the way in the coming months – especially if new customers continue to flock to the space. It’s a nice little push forward considering some analysts predict bitcoin to fall even further.

Data issued in the report show that the number of user accounts on digital exchanges nears the 150 million-mark for 2018. This is almost double the number of accounts in 2017, which was only at about 80 million. In addition, the number of ID-verified accounts sprung from about 20 million to 40 million between 2017 and now.

However, the study confirms that bitcoin is still largely being used for investing purposes rather than for commerce or making purchases. Volatility remains extremely high, which has prevented bitcoin from being used as a potential “money replacement” more often.

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