November 28, 2019
U.S., Canada, Mexico Meet to Push for Final Agreement on USMCA
“The White House pushed Wednesday to wrap final negotiations with Democrats on President Donald Trump’s top legislative priority, the U.S.-Mexico-Canada Agreement, in meetings with top Mexican and Canadian officials. The administration and House Democrats have been locked in tense negotiations for months to secure a potential vote before the end of the year on USMCA and this week managed to narrow their differences. Wednesdays meeting broke up without a USMCA deal announcement but with Mexico and Canada citing progress. Mexican deputy foreign minister Jesus Seade met first with Trump’s trade chief Robert Lighthizer to discuss the fixes that Lighthizer offered House Speaker Nancy Pelosi verbally earlier this week. Lighthizer, the U.S. Trade Representative, needs Mexico and Canada’s sign-off before Democrats will support USMCA. “We are on the way to a resolution,” Seade told reporters Wednesday after the meeting in Washington. “I have to check some documents I’ve received, check them carefully and maybe discuss adjustments. So we still have some way to go but we are going well.” Representatives of the U.S., Canada and Mexico then met later Wednesday evening at Lighthizer’s office. After, Canada’s deputy prime minister, Chrystia Freeland, told reporters they had a good discussion and that work is continuing. “We very much believe that getting this agreement ratified by all three countries will be positive for all three countries,” she said, adding that they met to do their part to get USMCA “across the finish line.” Freeland declined Wednesday to give a timeline for any final pact and signaled an openness to change some of the text of the USMCA, something she previously ruled out. Seade said he will visit Canada Friday for further talks.”
Euro-Area Sentiment Brightens in Sign Economy Reached Trough
“Economic confidence in the euro area improved more than forecast this month, adding to signs the region might be through the worst of its recent slump. The European Commission survey is the latest to suggest growth prospects in the 19-nation region have at least stopped deteriorating after the European Central Bank unleashed new monetary support in September. Sentiment improved in industry, services, retail and among consumers in November, with forward-looking sub-components faring particularly well. The euro-area economy expanded a mere 0.2% in the third quarter as manufacturing suffered from weaker global momentum, the U.S.-China trade war and geopolitical uncertainty. While domestic demand has held up reasonably well and Germany, the bloc’s largest economy, narrowly avoided a technical recession, policy makers still see risks to the outlook on the downside and have called for fiscal stimulus. According to the Commission survey, industry managers were more optimistic on production expectations and their stocks of finished products. But in a sign not all is good, they were still downbeat on export demand, and grew more pessimistic about hiring and their ability to raise prices. For services firms, the outlook for demand improved to a five-month high and employment expectations were relatively steady. Bloomberg economist Maeva Cousin pointed to better leading indicators in arguing growth has accelerated. The euro-area economy expanded at an annualized rate of 0.1% in the three months to November, she said. IHS Markit said last week that while private-sector activity in France and Germany picked up in November, momentum in the rest of the region showed concerning signs of weakening. With the economy still facing huge uncertainty, ECB President Christine Lagarde urged a new policy mix in her first major speech this month, arguing public investment should be stepped up to ease the burden on the central bank. “We have a unique possibility to respond to a changing and challenging world by investing in our future,” she said. “All of this would be a game changer, not just for our own stability and prosperity, but for that of the global economy, too.” ”
The Indian Rupee is Getting Crushed by Its Own Central Bank
“The Reserve Bank of India’s efforts to support the flagging economy are turning out to be a bane for the rupee. The currency is the worst performer in emerging Asia this quarter, and analysts say that’s because the central bank is mopping up dollars gushing into local stocks and bonds. The RBI bought has about $18 billion of foreign exchange since the end of September, according to estimates by Bloomberg Economics. While the purchases have propelled reserves to a record, the rupee has fallen about 0.7% since Sept. 30. Weakness in the rupee despite robust inflows is seen as a sign the central bank wants to curb a sharp appreciation in the currency that can hurt exports. With slew of data pointing to weak economic activity, boosting shipments is high on agenda for the government. “Part of the rupee’s under performance is deliberate,” said Mitul Kotecha, a senior EM strategist at TD Securities in Singapore. “Higher reserves prove that the central bank is probably making determined efforts to keep the rupee’s competitiveness.” The RBI has said it does not target any particular level of exchange rate and steps in only to curb undue swings in the currency. Though, as the rupee was heading for its worst quarterly decline in a year in the three months ended September, Governor Shaktikanta Das said Sept. 19 that the currency is fairly valued, indicating tolerance for a weaker rupee. India’s exports have shrunk for three months in a row, contributing to further deepening of a growth slowdown. A report on Nov. 29 is likely to show gross domestic product grew 4.6%, which would be the weakest pace of expansion since the first three months of 2013. Expectations that the government will continue to take steps to revive growth has prompted foreign funds to pump $4.6 billion into local shares and more than $600 million into debt this quarter. The purchases have pushed up the nation’s equities to a record, and sent the rupee to a three-week high. The currency fell 0.4% to close at 71.62 per dollar on Thursday. The central bank will continue to soak up the inflows to address the rupee’s overvaluation, according to Kotak Securities Ltd. “When you have decent inflows, there is no reason for the rupee to depreciate and the RBI’s sharp dollar purchases are the predominant reason behind the weakness,” said Anindya Banerjee, a currency analyst at Kotak in Mumbai.”
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