ForexLive Asia FX news wrap: US Treasury and Federal Reserve publicly fight
Forex news for Asia trading for Friday 20 November 2020
- RBA concerned over recent operational issues at the Australian Stock Exchange
- Georgia to certify Biden as winner of the state on Friday, Michigan and Pennsylvania to follow on Monday
- RBA agenda next week is light - but Guy Debelle, Deputy Governor, will speak
- New Zealand data, credit card spending in October +1.5% m/m (still down y/y)
- South Korea sees infection increase as 3rd wave of coronavirus outbreak
- US oil storage is once again approaching capacity
- China's one- and five-year loan prime rates (LPR) are unchanged
- Japan chief cabinet secretary Kato urges maximum caution on coronavirus situation in the country
- PBOC sets USD/ CNY reference rate for today at 6.5786 (vs. yesterday at 6.5484)
- FX option expiries for Friday November 20 at the 10am NY cut
- South Australia premier Marshall says will scale back coronavirus restrictions sooner than first planned
- Japan Jibun Bank / Markit preliminary PMIs for November
- Australia preliminary retail sales for October +1.6% m/m
- WHO recommends against use of Remdesivir
- UK - GfK Consumer Confidence for November: -33 (expected -34, prior -31)
- Fed's Bostic says he was a bit surprised by the US Treasury decision
- Japan inflation data for October: Headline CPI -0.4% y/y
- Mnuchin says he hopes returned funds can be used for grants, not debt
- A recap of the public revolt from the Fed over US Treasury funding cut
- Pfizer is expected to file FDA application for coronavirus vaccine on Friday
- US state of Georgia is set to certify its election result November 20
- Coronavirus - California curfew announced: 10pm to 5am
- Coronavirus - Canadian province of Quebec extends its restrictions to January 11
- The countdown is on to December 31 - US economy plunge
- Federal Reserve in battle against US Treasury over emergency funds
- US President-elect Biden says has not ruled out legal action over GSA transition delay
- US President-elect Biden says discussed nationwide mask mandate with state governors
- Media reports EU leaders have called for no deal Brexit preparations to be ramped up
Further reports that EU leaders are intensifying preparations for a no trade deal Brexit shipped a fe points off GBP as US markets closed for Thursday. Conflciting headlines on Brexit talk developments will also be intensifying in coming days and weeks, as a heads up. But 'm sure y'all now this already.
The Brexit news was soon swamped by US Treasury Secretary Mnuchin issuing an order to the Federal Reserve to return unused funds for certain of its monetary policy support programs. There is more in the bullets above. The optimistic take on this is that Mnuchin will want the returned funds to be directed towards fiscal measures, which would be a positive. But Mnuchin's comments indicate he has no plan for this, only a vague hope:
- "I hope that Congress will seriously consider reallocating $580 billion of funds that have already been appropriated that wouldn't cost taxpayers an additional penny."
Perhaps after Congress has all joined hands and sung Kumbaya I guess. This is just smoke from Mnuchin, the less optimistic take is this is another cut to support for the economy and will lead to further damage.
The Biden administration could reverse course on this, of course. But that is not until January 20, which in the coronavirus-damaged US economy is an eternity away.
Of concern also was the immediate and public response from the Fed, disputing the decision. Fed Atlanta head Bostic was soon on the wires reiterating the public disagreement between the Fed and Treasury.
In markets the first response was a sell-off for risk FX and a bid for the USD. When Globex reopened US equity index futures were marked lower.
As the session in Asia progressed currency losses were unwound, with retracements against the dollar for EUR, AUD, NZD, GBP and CAD. USD/CHF has been notably weak. As I post many of these are on approach to where they were before the Mnuchin news hit so resistance will be encountered.