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SINGAPORE (Reuters) – The dollar waned on Tuesday following a slight pick up in risk appetite, but it held tight ranges against its peers ahead of key inflation data from major economies this week that markets are looking to for guidance on the global interest rate outlook.Currency moves were largely subdued in early Asia hours after a quiet overnight session due to holidays in Britain and the United States, but the overall mood was positive with world shares firming.The euro was a touch firmer at $1.0860 despite some dovish comments from European Central Bank (ECB) policymakers on Monday and data showing German business morale stagnated in May.German inflation data due on Wednesday and the wider euro zone bloc’s reading on Friday will be watched for confirmation of an ECB rate cut expected next week, alongside clues on how soon subsequent easing from the central bank could come.”The ECB is preparing itself for rate cuts next week, but the importance is what happens beyond that, and the lack of guidance from ECB speakers is telling in that sense,” said Rodrigo Catril, senior FX strategist at National Australia Bank (OTC:NABZY) (NAB).”Obviously, the inflation dynamics will set the tone in terms of what to expect.”Sterling held near an over two-month high and last bought $1.2774, while the New Zealand dollar inched up nearly 0.1% to peak at $0.6155, its strongest level since mid-March.Down Under, the Aussie edged 0.03% higher to $0.6657, with the country’s monthly consumer price index data also due on Wednesday.All of that data, however, will be a sideshow to the main focus for markets on Friday when U.S. core personal consumption expenditures (PCE) price index report is released – the Federal Reserve’s preferred measure of inflation – where expectations are for it to hold steady on a monthly basis.The outlook for U.S. rates has been the dominant driver of currency moves over the past few years, and recent data from the world’s largest economy has blown hot and cold which has dented policymakers’ confidence on the pace and scale of rate cuts expected this year.”The market is well priced for a benign number, and that needs to be delivered… for current Fed cut expectations for this year to be sustained,” said NAB’s Catril.”Any number that surprises on the topside, we think, will provide quite a big reaction in terms of a move up in U.S. yields and for the dollar to rip higher.”Against a basket of currencies, the dollar dipped 0.01% to 104.55.Elsewhere, the yen languished near the 157 per dollar level and last stood at 156.87 per dollar, though it was on track for its first monthly gain for 2024, helped by suspected intervention from Japanese authorities towards the end of April and start of May.Tokyo inflation data, a leading indicator of nationwide figures, is similarly due on Friday, which could provide further clues on how soon subsequent rate hikes from the Bank of Japan (BOJ) could come.BOJ Governor Kazuo Ueda said on Monday the central bank will proceed cautiously with inflation-targeting frameworks, noting that some challenges are “uniquely difficult” for Japan after years of ultra-easy monetary policy.In cryptocurrencies, bitcoin eased 0.47% to $69,255, while ether fell 0.2% to $3,882.20. More
Standard DigitalWeekend Print + Standard Digitalwasnow $85 per monthBilled Quarterly at $199. Complete digital access plus the FT newspaper delivered Monday-Saturday.What’s included Global news & analysisExpert opinionFT App on Android & iOSFT Edit appFirstFT: the day’s biggest stories20+ curated newslettersFollow topics & set alerts with myFTFT Videos & Podcasts20 monthly gift articles to shareLex: FT’s flagship investment column15+ Premium newsletters by leading expertsFT Digital Edition: our digitised print editionWeekday Print EditionFT WeekendFT Digital EditionGlobal news & analysisExpert opinionSpecial featuresExclusive FT analysisFT Digital EditionGlobal news & analysisExpert opinionSpecial featuresExclusive FT analysisGlobal news & analysisExpert opinionFT App on Android & iOSFT Edit appFirstFT: the day’s biggest stories20+ curated newslettersFollow topics & set alerts with myFTFT Videos & Podcasts10 monthly gift articles to shareGlobal news & analysisExpert opinionFT App on Android & iOSFT Edit appFirstFT: the day’s biggest stories20+ curated newslettersFollow topics & set alerts with myFTFT Videos & Podcasts20 monthly gift articles to shareLex: FT’s flagship investment column15+ Premium newsletters by leading expertsFT Digital Edition: our digitised print editionEverything in PrintWeekday Print EditionFT WeekendFT Digital EditionGlobal news & analysisExpert opinionSpecial featuresExclusive FT analysisPlusEverything in Premium DigitalEverything in Standard DigitalGlobal news & analysisExpert opinionSpecial featuresFirstFT newsletterVideos & PodcastsFT App on Android & iOSFT Edit app10 gift articles per monthExclusive FT analysisPremium newslettersFT Digital Edition10 additional gift articles per monthMake and share highlightsFT WorkspaceMarkets data widgetSubscription ManagerWorkflow integrationsOccasional readers go freeVolume discountFT Weekend Print deliveryPlusEverything in Standard DigitalFT Weekend Print deliveryPlusEverything in Premium Digital More
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JERUSALEM (Reuters) -The Bank of Israel held short-term interest rates steady on Monday for the third straight meeting, citing rising price pressures, a rebound in economic activity and continued geopolitical uncertainty resulting from Israel’s war with Hamas in Gaza.The central bank kept its benchmark rate at 4.50%. It had lowered the rate by 25 basis points in January after inflation eased and economic growth was hit by the war, but kept policy steady in February and April.Governor Amir Yaron indicated it would be difficult to lower rates further as long as inflation pressures persist and the war remains uncertain and drives up government spending.”All these parameters are putting more of a burden on the process of interest rate normalisation because we are determined to not allow inflation to diverge,” Yaron told Reuters.The rate cut process “is going to be very cautious and very measured.”All 15 analysts polled by Reuters had expected no change in rates on Monday and many economists believe the rate could stay put for the rest of 2024.”There has been some increase in the inflation environment,” the central bank said in a statement. “Inflation expectations… for the coming year increased, and are around the upper bound of the target range.”It noted that economic activity and the labour market continue to recover gradually, while continued geopolitical uncertainty is reflected in the economy’s high risk premium.”In view of the war, the monetary (policy) committee’s policy is focusing on stabilizing the markets and reducing uncertainty, alongside price stability and supporting economic activity,” the bank said.The shekel was flat versus the dollar at 3.675, having strengthened from 3.83 to the dollar a month ago due to expectations of a delay in the monetary easing cycle. The Bank of Israel reiterated that the interest rate path will be determined by future inflation, and continued stability in the financial markets, economic activity and fiscal policy. When the bank cut rates in January, policymakers had believed the easing cycle would be gradual and result in cuts of up to one percentage point in 2024, but inflation has remained stubborn.Morgan Stanley economist Alina Slyusarchuk said a 25 basis point rate cut could come in November with another 100 basis points in 2025. “The risks to our call are skewed to a delay, with the chance the cutting cycle would resume in 2025 only,” she said. Israel’s annual inflation rate rose to 2.8% in April, still within the bank’s target range of 1-3%, after reaching 2.5% in February. Despite a rise in living costs and higher mortgage and other loan rates that make it tough for many households to make ends meet, the economy grew an annualised 14.1% in the first quarter from the prior three months after shrinking in the fourth quarter after the war broke out on Oct. 7. More
TORONTO (Reuters) – Canada, Mexico and Argentina on Monday started to settle securities trades faster, halving settlement time to one day, in a move designed to reduce counterparty risk and improve market liquidity.Settlement is the final stage of a trade, when buyers get their securities delivered and sellers are paid.Market participants and regulators in the United States are paying close attention to the implementation of the so-called T+1 in Canada, Mexico and Argentina because Wall Street will shift to one-day settlement on Tuesday for equities, corporate and municipal bonds and other securities.As global markets are highly integrated, any hiccups there could signalize potential issues for the United States too.”Everything is bright green at this point in time. There are no issues and everybody is extremely optimistic,” said Keith Evans, executive director of the Canadian Capital Markets Association, a federally incorporated industry organization.Volumes will likely be up to 25% lighter than normal due to the U.S. holiday on Monday, making it “somewhat of an advantage” for Canada, Evans added.In Argentina, Gonzalo Pascual Merlo, chief executive of local exchange operator BYMA, told Reuters that the change would further strengthen the country’s capital markets.”Implementing this measure brings clear benefits for the whole ecosystem, from liquidity providers to investors and other participants,” he said.A BYMA spokesman added that implementing the quicker settlement would “strengthen the friction-less arbitrage with other global markets and reduce counterparty risk in normal settlement, increasing security for capital markets participants.”Although regulators have been discussing the implementation of one-day settlement for a long time, it gained more traction after the 2021 trading frenzy around the “meme stock” GameStop (NYSE:GME) highlighted the need to reduce counterparty risk and improve capital efficiency and liquidity in securities transactions.In China and India, the new standard is already in place, while Britain and the European Union plan to shift in the coming years.The more countries or markets adopt T+1, the more efficient the faster settlement it will be for global investors. Currency trades funding securities transactions currently settle in two days. Because of issues like this, regulators and market participants expect a temporary increase in trade fails. Research firm ValueExchange found in a survey that market participants expect the trade fail rate to increase to 4.1% after T+1 implementation from 2.9%.”The next few days promise to be challenging,” said Nawan Butt, head of capital markets at Purpose Investments in Toronto. “We have to spend the time to handhold all trades and make sure trade fail rates remain low as funding costs are quite high with the current interest rate backdrop.” More
JERUSALEM (Reuters) – Israeli-Turkish trade has weathered many bilateral diplomatic storms over the decades and stayed on course, reaching billions of dollars a year, but Israelis fear it may not survive the latest rift over the war in Gaza.Turkey this month halted all bilateral trade with Israel until the war ends and aid can flow unhindered into Gaza. Israel said Turkey’s move violated World Trade Organization rules.Israeli importers have scrambled to find alternative sources of key items ranging from cement to food and cars in response to Turkey’s decision, which economists say may lead to near-term shortages but is unlikely to dent Israel’s $500 billion economy.”Turkey is a significant trade partner of Israel but we do not rely exclusively, or even remotely exclusively, on Turkey,” said Shmuel Abramzon, chief economist at Israel’s Finance Ministry, who now believes Israel’s 2024 economic growth will exceed his current 1.6% forecast.”While some alternatives may introduce higher costs, we do not anticipate significant or persistent disruption to the Israeli economy by Turkey’s actions.”Bilateral trade slid nearly 23% to $6.2 billion in 2023, Israeli government data shows, with Israeli imports accounting for around three quarters of that figure.After Ankara’s move, several Turkish export companies told Reuters they were seeking ways of sending goods to Israel via third countries, but exporters and importers in both Turkey and Israel have since said there is no sign of this succeeding.Trade officials say Greece, Italy and others are willing to fill the vacuum left by Turkey and that deals are close but the main problem will be finding alternative destinations for more than $1.5 billion worth of displaced Israeli exports, largely fuel, chemicals and semiconductors.”I don’t think the economy should rely on a country that says one day ‘we want to trade with you’ and on another day ‘we don’t want to trade with you'”,” said Roey Fisher, head of the Economy Ministry’s Foreign Trade Administration.”Trade should be reliable and sustainable … And therefore, we feel that our goal is to find reliable sources for the long term,” he told Reuters. FROSTY TIESTurkish President Tayyip Erdogan has been sharply critical of Israel’s military offensive in Gaza against the militant Palestinian group Hamas.The war began on Oct. 7 when Hamas gunmen stormed into Israel, killing around 1,200 people and seizing more than 250 hostages, according to Israeli tallies. Nearly 36,000 Palestinians have been killed in Israel’s subsequent offensive, Gaza’s health ministry says.Shortly before the war erupted, Erdogan and Israeli Prime Minister Benjamin Netanyahu had met in person, amid a slow improvement in ties long strained by the Palestinian issue. But their plans to visit each other’s country were then shelved.Turkey recalled its ambassador to Israel in November for consultations and flights between the two countries have been suspended. Erdogan has called Hamas a “liberation movement” and hosted its chief, Ismail Haniyeh, in Istanbul last month.In retaliation for the trade ban, Israeli Finance Minister Bezalel Smotrich said he would scrap the free trade agreement with Turkey – at least until Erdogan steps down and is replaced by “a leader who is sane and not a hater of Israel”. The plan, he said, would be submitted to cabinet for approval.Turkey is the first – and so far the only – major trade partner of Israel to suspend trade over the Gaza war. Turkey ranks as Israel’s fifth biggest trade partner but still accounts for less than 5% of its total imports.’NOT A CATASTROPHE’However, Turkey has accounted for some 40% of Israel’s imported cement, said Shay Pauzner, deputy director general of the Israel Builders Association.While the industry has turned to European suppliers, he said, “it will be much more expensive than from Turkey”, which is known for cheap industrial products.”It’s a problem, not a catastrophe,” he added.Meanwhile, two of Israel’s main auto importers said certain models of Toyota (NYSE:TM) and Hyundai (OTC:HYMTF) cars were stuck at Turkish ports due to the trade ban.Union Motors, Israel’s Toyota importer, said the ban had impacted the delivery of Corolla and C-HR models and that it was seeking solutions.Colmobil, which imports Hyundai autos from Turkey, said it was suspending orders for some models and working with the manufacturer on supply solutions.Similarly, Diplomat – one of the largest importers in Israel – said it was trying to find alternatives to Turkey to bring in a range of consumer products, including brands from Heinz, Gillette, Braun and Pampers.Israeli officials say they plan to increase local production to avert shortages. An Israeli Manufacturers’ Association survey last week found that 80% of manufacturers had alternatives to Turkey, while 60% said they had a three-month inventory.”Although we have become addicted to the cheap imports from Turkey … it is possible to get by fine without it,” said association president Ron Tomer. “As a country, we must reduce as much as possible the dependence on hostile countries and strengthen our productive independence.” More
