Aurelia Butler

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Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.Few trade conflicts can be calibrated quite so precisely, commodity by commodity, as the China-Australia spat whose denouement continued to play out last week. Four years after Beijing started to impose trade bans in retaliation for Canberra’s temerity in suggesting an inquiry into the origins of Covid-19, China lifted its tariffs on imports of Australian wine. It has already eased restrictions on trade in coal and barley: there are now rock lobsters and beef to go. For its part, Australia dropped a World Trade Organization case against Beijing over the wine tariffs.Both sides portrayed the outcome as a mutually beneficial de-escalation of tensions. But fair-minded observers would award a win on points to the country of almost 27mn people with a gross domestic product of $1.7tn against the one with an economy 10 times the size which also has nuclear weapons. Australia stuck to its geopolitical stance as a strong US ally and China backed down. With resistance to economic coercion a pressing issue, the episode has been keenly watched in Brussels, Washington and Tokyo — and indeed in Brasília, Jakarta, Hanoi, Seoul and New Delhi.Australia’s resilience owed much to its economic flexibility, its barley and wine exporters rolling with the punch of trade restrictions and finding new markets elsewhere. Perhaps less appreciated is the country’s other strength — a degree of policy coherence and political consensus which resisted attempts by Beijing to bully and sow division.In this context Australia starts with the advantage of a parliamentary system with a strong executive, helping create focus and consistency — unlike, for example, the US’s separated federal powers or the EU’s multi-layered system of commissioners, the European parliament and member states.But it’s about political choice as well as constitutional inheritance. Since the liberalising reforms started by the Labor government under prime minister Bob Hawke in the 1980s, Australia has hammered out a cross-party open-trade consensus. An effective business-government nexus promotes exports in the economy’s comparative advantages of agriculture, food and minerals, and more latterly education and tourism.Australia has aligned its trade policy with its national security interests. In 2022 it signed a preferential trade agreement with India to signal diversification from China, and has used its investment screening powers to block Chinese takeovers of Australian businesses.Indeed, the country’s determination to maintain political independence from China has also recently extended to jailing a businessman who broke a tough law against foreign interference by trying to influence a government minister.Throughout the period of the dispute, there was remarkably little partisan divide over maintaining a robust policy towards China’s coercion — beyond some opportunistic point-scoring during the general election of 2022 in which Anthony Albanese replaced the Liberal prime minister Scott Morrison. Albanese has attracted criticism for being the first prime minister to visit China since 2016, but he made sure first to go to Washington to confirm the alliance with the US.Contrast this with other advanced economies. Even before Donald Trump, the US failed to make trade policy cohere with its geostrategic rivalry with China. George W Bush and Barack Obama’s administrations created the Trans-Pacific Partnership, aimed at encircling China with a ring of economies aligned with a US model of trade, but Congress blocked it in a fit of parochial mercantilism over tobacco and pharmaceuticals. Trump then handed Xi Jinping a propaganda victory by being duped into a deal to buy American exports which China signally failed to keep.The US can’t now sign any substantive trade deals at all thanks to the toxicity of the issue in Washington. Joe Biden’s administration isn’t just at odds with Congress and previous administrations: it’s fighting itself. Out of the blue, the US trade representative’s office recently reversed a long-standing US consensus policy on cross-border data flow, thereby sabotaging its own (in any case largely symbolic) trade agreements with Asia-Pacific countries. Beijing must have found it hard to keep a straight face.EU trade policy has somewhat more consistency and less hysteria, with the commission providing a degree of continuity. There is also a growing consensus about the dangers of China. Whatever their private views on the wisdom of Lithuania provoking China by upgrading diplomatic ties with Taiwan in 2021, the rest of the EU did at least rally round the Baltic state when China retaliated with trade restrictions. Still, member states’ retention of national security powers undermines united fronts on issues such as Huawei’s participation in 5G systems or screening Chinese inward investment. Hungary’s Prime Minister Viktor Orbán revels in breaking EU solidarity to deal with Vladimir Putin and Xi. Orbán has persuaded the Chinese electric-vehicle manufacturer BYD to set up its first European plant in Hungary, and is building a rail line from Budapest to Belgrade with Chinese help. Nor is there even a coherent foreign policy from the EU’s leading western European governments. The French President Emmanuel Macron dismayed other EU governments last April by unilaterally striking a remarkably pro-China note following a trip to Beijing.Australia’s trade and security strains with China are certainly not over. Any tension in the region involving China never is. But Canberra’s success in this particular episode underlines that conflicts are best fought with unity on the home front. Today wine, tomorrow hopefully beef and lobsters: the redoubts of Chinese trade coercion continue to [email protected] More

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SINGAPORE (Reuters) – The dollar was pinned beneath recent peaks on Thursday with traders taking remarks from Federal Reserve Chair Jerome Powell as reassuring on the likelihood of interest rate cuts this year while waiting for the latest U.S. labour market readout.An unexpected slowdown in U.S. services growth also supported cut expectations and weighed on the dollar, though for the year so far it remains the best-performing G10 currency as those expectations are far more modest than three months ago.The yen, which has been frozen lately by the risk of official intervention, hardly enjoyed much relief either, and at 151.56 was more or less where it has been for three weeks.The euro, up 0.6% overnight, was back to the middle of a range it has kept for a year at $1.0837. European inflation came in softer-than-expected on Wednesday, reinforcing expectations for a European rate cut in June.Jerome Powell made balanced remarks noting policymakers will be guided by economic data. Traders focused on his view that recent figures had not changed his broad outlook, and his reminder that “most FOMC participants see it as likely to be appropriate to begin lowering the policy rate at some point this year.””The speech broadly affirmed the Fed is on track to cut rates this year, with data determining the timing. We think by July, the (Fed) will likely have sufficient confidence to begin cutting rates,” said analysts at ANZ.Futures pricing was broadly steady and implied markets see about a 60% probability of a Fed cut in June.The Australian dollar broke above its 200-day moving average as the U.S. dollar dipped overnight and was steady at $0.6568 on Thursday.The Aussie is at a five-month high on the New Zealand dollar with traders expecting New Zealand rate cuts beginning in August but Australian rates on hold until November. [AUD/]The New Zealand dollar rose 0.7% on the greenback overnight to regain a foothold above $0.60. It was last trading at $0.6013. Sterling bought $1.2645 – also in the middle of a range it has kept since December. [GBP/]Chinese markets were closed for a holiday.The U.S. dollar index, up 2.8% this year as market expectations for more than 160 basis points of U.S. rate cuts have been sliced in half, was last at 104.22. It made a four-and-a-half-month high of 105.10 on Tuesday.U.S. Treasury yields, which shot up earlier in the week, retreated slightly overnight. [US/]PMI readings are due in Europe later on Thursday, as is the readout from last month’s European Central Bank meeting. The major focus for the rest of the week will be on U.S. labour data due on Friday. More

BENGALURU (Reuters) – The U.S. dollar will remain strong over the coming months as financial markets continue to push back on expectations for the timing and magnitude of Federal Reserve interest rate cuts, according to foreign exchange strategists polled by Reuters.Bucking a brief downward trend in late 2023, the greenback has strengthened about 3.3% this year against a basket of major currencies, with trader positioning data showing net-long dollar bets at their highest since September 2022.A strong U.S. economy and sticky inflation has forced financial markets to rethink their bets on the timing of the first Fed rate cut.While markets currently expect a roughly 60% chance for a cut in June, they have priced in roughly 75 basis points of rate reductions this year – what some policymakers consider “reasonable” and in line with the Fed’s own projections.But that is markedly lower than the nearly 150 basis points of cuts markets were expecting earlier this year, suggesting the dollar was likely to stay dominant in the near-term. None of the major currencies were expected to recoup their year-to-date losses against the dollar, at least in the coming three months, according to currency strategists in the March 28-April 3 Reuters poll.”Markets are gradually learning that this is not a ‘cut-no-matter-what’ environment, but rather one where there is ‘no rush to adjust’ … That should continue to put a floor under the dollar, at least until inflation relief comes into clearer view,” strategists at Goldman Sachs noted.The euro, trading around $1.08 on Wednesday, was expected to gain about 1.0% to $1.09 by the end of June, making small inroads into a 2.3% loss so far this year. It was then forecast to strengthen another 1.0% to $1.10 in six months, according to median forecasts from 90 foreign exchange analysts.YEN TO REMAIN CARRY CURRENCY OF CHOICEThe battered Japanese yen, down nearly 25% since early 2022 and around 1% after the Bank of Japan (BOJ) raised interest rates last month for the first time in 17 years, was expected to be one of the biggest gainers against the dollar among major currencies in the coming year.Currently trading at 151.7 per dollar, the yen was forecast to rise about 6.1% to 143 by the end of September, before strengthening another 2.9% to 139 in 12 months. The BOJ is forecast to hike at least once more this year.Still, the median of about 30 respondents to an additional question showed the weakest the yen, reeling off a 34-year low last week, would fall to is 152 per dollar this month. Responses ranged from 151.8 to 155.0.If realised, this could open the door to currency intervention by Japanese authorities, who recently said they could take “decisive steps” against yen weakness.The last time they intervened was when the currency fell to lows near 152 per dollar in October 2022.Asked whether the yen was still the preferred funding currency for carry trades – borrowing in a low interest rate currency to invest in a higher yielding currency – a near-90% majority of respondents, 26 of 30, said it was.The remaining four chose the Swiss franc.”The BOJ’s negative interest rate policy/yield curve control removal was highly telegraphed and essentially fully priced into the FX market … as a result, we got a classic ‘buy the rumor, sell the fact’ type reaction in the JPY,” said Alex Cohen, FX strategist at Bank of America.”Carry is still a key factor driving the yen, which should continue to be used as a funding currency. Moving from a slightly negative to a slightly positive policy rate won’t change that.”(For other stories from the April Reuters foreign exchange poll:) More

WhatsApp said in a post on the social media platform X that the issues had been resolved.At its peak, the outage impacted more than 24,000 WhatsApp users in the United States, while Instagram users also reported over 5,000 outages, Downdetector data showed.Around 1,000 people were still facing issues with Instagram in the United States, per Downdetector, which tracks outages by collating status reports from a number of sources including user-submitted errors on its platform.The WhatsApp outage had impacted thousands of users in India, the United Kingdom and Brazil, per Downdetector data.Meta did not immediately respond to a Reuters request for comment.Last month, hundreds of thousands of users of the social media company’s Facebook (NASDAQ:META) and Instagram were impacted globally for more than two hours following an outage that was caused by a technical issue.Meta has about 3.19 billion daily active users across its family of apps, which also includes Threads. More

The central bank issued its revised forecast a day after slashing its benchmark interest rate by 75 basis points to 6.5% and signaling further rate cuts, whose size and timing will depend on the “evolution of the macroeconomic scenario and its implications for the trajectory of inflation.”Chile’s economic activity has surprised to the upside in early 2024, overshooting expectations in January and February.Inflation in the Andean country, the central bank noted in its monetary policy report on Wednesday, has declined sharply towards the 3% target after peaking in 2022, largely due to reduced domestic spending and a narrowing activity gap.This has helped correct “large” macroeconomic imbalances observed in recent years, the central bank noted, with two-year inflation forecasts remaining steady at 3% for multiple consecutive quarters.The central bank said it now projects headline inflation to end this year at 3.8% in light of the local currency’s recent depreciation, up from a previous estimate of 2.9%, but still sees it converging to the target within its two-year policy horizon. It also projected GDP growth in 2025 and 2026 to range between 1.5% and 2.5%, indicating a convergence to the economy’s potential growth rate.The projection for next year came in slightly below the previous growth forecast of 2% to 3%.The central bank in the world’s largest copper producer also estimated copper prices to average $3.85 per pound in 2024, up from a previous forecast of $3.80 per pound. More