Aurelia Butler

The friendless euro, which is heading for a calendar-year drop of nearly 5% on the dollar, was not far from the year’s lows at $1.0518.The gap between U.S. and German ten-year yields is 216 basis points and has widened nearly 70 bps in three months.The yen was on the back foot for a seventh consecutive session – and marginally weaker at 154.17 per dollar in morning trade – as markets have pared chances of a Japanese rate hike this week and see a move in January as more likely.The Federal Reserve announces its interest rate decision on Wednesday and interest rate futures imply a 94% chance of a hike, even as services-sector activity leapt to a three-year high according to an S&P Global purchasing managers survey.The Atlanta Fed’s GDPNow indicator is running at 3.3% for the fourth quarter and the strength of the economy has been lifting yields and supporting the dollar as traders figure this week’s expected cut may be the last for a while.After a cut on Wednesday, markets see about a 37% chance there will be either one 25 bp cut or none at all through the whole of 2025, according to the CME FedWatch tool, up from about 21% a week earlier. “I think the Fed will now be worried about a resurgence of inflation as an unknown policy mix and sticky prices create many paths for inflation to make a comeback in 2025,” said Brent Donnelly, president at Spectra Markets.”And therefore I think they will signal a very cautious approach going forward and lean on language that suggests concerns about inflation and a higher neutral rate.”Besides the Fed, the Bank of Japan, Bank of England and Norges Bank meet this week and are expected to stand pat on Thursday, while the Riksbank is seen cutting rates, perhaps by 50 basis points.Sterling bounced on Monday as a survey of business activity pointed to price rises in Britain while labour data is due on Tuesday, with upward pressure on wages seen adding to the case for caution from the central bank. Sterling last bought $1.2695.The Canadian dollar, squeezed by falling interest rates and the risk of U.S. tariffs, sank to a 4-1/2 year low on Monday as the sudden resignation of Finance Minister Chrystia Freeland put an unpopular government under more pressure.The Australian and New Zealand dollars are pinned near the year’s lows, though were spared any further selling on the latest weak Chinese economic indicators on Monday as markets bet that government spending will ride to the rescue. [AUD/]The Aussie was last steady at $0.6373 and the kiwi inched up to $0.5792. New Zealand increased its bond issuance forecast for the next few years and long-term yields rose. China’s yuan was under gentle pressure at 7.2918 in offshore trade, as dour expectations for Chinese economic growth pushed 10-year bond yields to record lows. More

OTTAWA (Reuters) – Canadian Finance Minister Chrystia Freeland quit on Monday after clashing with Prime Minister Justin Trudeau on issues including how to handle possible U.S. tariffs, dealing an unexpected blow to an already unpopular government.Freeland said she was quitting in the wake of a meeting last Friday with Trudeau, who asked her to take on a lesser post after the two had been arguing for weeks over spending.Public Safety Minister Dominic LeBlanc – a member of Trudeau’s inner circle – was quickly named finance minister of the minority Liberal government.The resignation of Freeland, 56, who also served as deputy prime minister, is one of the biggest crises Trudeau has faced since taking power in November 2015. It also leaves him without a key ally when he is on track to lose the next election to the official opposition Conservatives.A Liberal source said Trudeau wanted Freeland to serve as minister without portfolio dealing with Canada-U.S. relations in name only – in effect a major demotion.Trudeau met the national Liberal caucus later on Monday – including Freeland – but legislators declined to say afterwards what had happened.Labour Minister Steven MacKinnon said there had been a good and frank conversation but gave no details.Trudeau later told a Liberal Party fundraiser in Ottawa that being prime minister was the privilege of his life.”It’s obviously been an eventful day. It has not been an easy day,” he said.The potential threat to his future was underlined when a top member of the opposition New Democrats, who have been helping keep the Liberals in power, said the party would vote to bring down Trudeau next year unless he quit.”If we’re coming up to a straight up non-confidence motion at the end of February, early March, that’s one of the tools that we have,” House of Commons leader for the NDP Peter Julian told the Canadian Broadcasting Corp.”We simply cannot continue like this,” he said, adding he expected Trudeau to have resigned by then.Party leader Jagmeet Singh had earlier been less equivocal when asked about bringing down Trudeau, whom he insisted should resign.Freeland quit just hours before she was due to present a fall economic update to parliament. The document showed the minority Liberal government had run up a 2023/24 budget deficit of C$61.9 billion, much higher than predicted.Trudeau can be toppled if the opposition parties unite against him on a vote of no confidence, though that cannot happen until next year.”Will the Prime Minister stay on? I think he will, but he’s certainly been seriously threatened … it could be that this is the event that will push him over the edge,” said Jonathan Malloy, a political science professor at Carleton University in Ottawa.Parliament is due to break for Christmas on Tuesday and not return until Jan. 27.Domestic media reports said Freeland and Trudeau had clashed over a government proposal for temporary tax breaks and other spending measures.”For the last number of weeks, you and I have found ourselves at odds over the best path forward for Canada,” Freeland said in a letter to Trudeau posted on X.Freeland said the threat of new U.S. tariffs represented a grave threat.”That means keeping our fiscal powder dry today, so we have the reserves we may need for a tariff war. That means eschewing costly political gimmicks, which we can ill afford,” she wrote.Conservative leader Pierre Poilievre said the government was spiraling out of control.”We cannot accept this kind of chaos, division, weakness, while we’re staring down the barrel of a 25% tariff from our biggest trading partner,” he told reporters.’LEADERSHIP CRISIS'”This will likely trigger a leadership crisis within the Liberal caucus … (it) is politically and personally devastating for Trudeau,” said Nik Nanos, founder of the Nanos Research polling firm.Polls show the Liberals are set to be crushed in an election that must be held by late October 2025.Freeland served as trade minister and then foreign minister before taking over the finance portfolio in August 2020. As minister, she oversaw the massive government spending campaign to deal with the damage done by COVID.Trudeau has been under pressure for months from Liberal legislators alarmed by the party’s poor polling numbers, in part due to unhappiness over high prices, and the loss of two safe parliamentary seats in special elections.The party is due to contest another special election in the province of British Columbia later on Monday.’BOMBSHELL’ DECISION”This is quite a bombshell,” said Nelson Wiseman, political science professor at University of Toronto. “I think the problem the Liberals have is that they have no mechanism to remove Trudeau. Only a full blown caucus revolt could do that.”Canada’s 10-year note yields climbed to their highest level since Nov. 28. They were last up 4.2 basis points at 3.2%. The Canadian dollar weakened to a four and a half year low at 1.4268 per U.S. dollar before reversing course.When Trump came to power in 2017 he vowed to tear up the trilateral free trade treaty with Canada and Mexico. Freeland played a large role in helping renegotiate the pact and saving Canada’s economy, which is heavily reliant on the United States.Although tensions between prime ministers and finance ministers are not unusual – Trudeau’s first finance minister quit in 2020 in a clash over spending – the level of invective in Freeland’s letter was remarkable by Canadian standards.Freeland left the same day as Housing Minister Sean Fraser announced he was resigning for family reasons. Another six ministers have either already quit or announced they will not be running again in the next election.Before entering politics in 2013, Freeland worked as a journalist and in senior editorial roles with several media companies, including the Financial Times, the Globe and Mail, and Reuters where she worked from 2010 to 2013. More

WASHINGTON (Reuters) -The U.S. Senate on Monday voted overwhelmingly to advance an $895 billion bill setting policy for the Pentagon toward passage as soon as Tuesday, which would send it to the White House for President Joe Biden to sign into law.The tally was 83 to 12 in favor of advancing the National Defense Authorization Act, or NDAA, to a vote on final passage, comfortably over the 60 needed in the 100-member Senate. The bill advanced despite the inclusion of a controversial provision aimed at banning some gender-affirming care for transgender children of service members.This year’s NDAA authorizes a record $895 billion in annual military spending, covering provisions on purchases of military equipment and boosting competitiveness with archrivals including China and Russia.The 1,800-page bill also focuses on improving the quality of life for the U.S. military.It authorizes a 14.5% pay increase for the lowest-ranking troops, and 4.5% for the rest of the force, higher than usual. It also authorizes the construction of military housing, schools and childcare centers.The bill bans the military health program, TRICARE, from covering gender-affirming care for the transgender children of service members if it could risk sterilization.Including the provision in the bill setting policy for the Department of Defense underscored how transgender issues have become a focus in U.S. politics. President-elect Donald Trump and many other Republicans blasted Democrats for supporting transgender rights during the 2024 election campaign, which ended with Republicans keeping control of the House and taking control of the Senate and White House starting next month.The fiscal 2025 NDAA is a compromise between Democrats and Republicans in the House and Senate, reached during weeks of negotiations behind closed doors. It did not include some other Republican proposals on social issues, including an effort to prohibit TRICARE from covering gender-affirming care for transgender adults and a measure that would have reversed the Pentagon’s policy of funding travel for abortion for troops stationed in states where the procedure is banned. The massive bill is one of the few major pieces of legislation Congress passes every year and lawmakers take pride in having passed it annually for more than six decades.The NDAA authorizes Pentagon programs, but does not fund them. Congress must separately pass funding in a spending bill for the fiscal year ending in September 2025. That bill is unlikely to be enacted before March. More

The Westpac-Melbourne Institute index of consumer sentiment fell 2.0% in December, unwinding a little of the sharp gains seen over the previous two months. The index is still up 13% on a year ago but at 92.8 showed pessimists again outnumbered optimists.Westpac Senior Economist Matthew Hassan said the pullback was likely influenced by a disappointing reading on economic growth released in early December.As a result, the index measuring the economic outlook for the next 12 months slid 9.6% and the outlook for the next five years dropped 7.9%. In contrast, the measure of family finances compared to a year ago rose 6.9%, still benefiting from tax cuts introduced from July. The biggest decline came in those with mortgages, reflecting doubts about when borrowing rates might finally fall.The Reserve Bank of Australia kept interest rates unchanged at 4.35% all year, though it did soften its tone this month and opened the door to easing as early as February.There was some improvement in the “time to buy a major household item”, which firmed 4.8% but remains below the 100 break-even mark.A separate survey from ANZ showed its confidence index fell 1.6% last week, largely due to a sharp drop in shopping intentions following Black Friday sales.Westpac’s time to buy a dwelling index fell 6.0% in December to a pessimistic 81.6, reflecting high mortgage rates and a lack of affordability. More

(Reuters) – A look at the day ahead in Asian markets. Asian market sentiment is likely to remain subdued on Tuesday following the release of mixed Chinese economic data the day before, as investors digest unnerving political events in key developed economies ahead of several G10 central bank interest rate decisions later this week.The resignation of Canada’s finance minister and vote of no confidence in Germany’s Chancellor on Monday come on the heels of a surprise credit rating downgrade for France on Friday. While not impacting emerging markets directly, these could all encourage investors to reduce risk exposure ahead of the central bank policy blitz.On the other hand, the dollar and U.S. bond yields were very well contained and U.S. stocks rose sharply again on Monday – the Nasdaq clocked its 36th closing record high of the year – as investors anticipate a rate cut from the Federal Reserve on Wednesday.The Japanese yen fell for a sixth consecutive day on Monday to a one-month low through 154.00 per dollar as traders cool on the prospect of a rate hike from the Bank of Japan this week or even in January. Some of Japan’s recent economic indicators have been fairly strong, which on top of the national wage growth settlements being agreed, would appear to bolster the case for the BOJ moving sooner rather than later.On the other hand, Japan’s economic surprises index last week hit its lowest in two and a half years. BOJ officials will also be nervously eyeing the heating up of U.S.-China trade tensions and pondering the potential fallout if Beijing allows a significant depreciation of its currency. A slim majority of economists in a Reuters poll published on Friday said the BOJ will keep borrowing costs on hold again this week. Last month’s poll showed a slim majority predicting a hike.Elsewhere in Asian currency markets, the South Korean won sold off again on Monday, as the country’s Constitutional Court began reviewing the impeachment of President Yoon Suk Yeol over his Dec. 3 martial law proclamation. The process will decide if he will be removed from office, while investigators plan to question him this week on criminal charges.The won is within sight of the low of 1443 per dollar on Dec. 3, its weakest level in two years. A break below 1445 per dollar will mark its weakest point since March 2009.Sentiment towards Chinese assets remains mixed. Official data from Beijing on Monday showed that foreign institutions cut holdings in Chinese onshore bonds for the third month in a row. The official disclosure chimes with recent figures from the Institute of International Finance, which recorded outflows in both China’s bond and equity markets in November.Here are key developments that could provide more direction to markets on Tuesday:- Hong Kong unemployment (November)- Singapore trade (November)- Germany Ifo and ZEW surveys (December) More

The Australian Prudential Regulation Authority (APRA) found that while trustee capability and approach have generally improved since the last unlisted asset review in 2021, a proportion of trustees still showed material gaps in key areas.Key weaknesses in unlisted asset valuation governance included board oversight, conflict of interest management, revaluation triggers, valuation controls and fair value reporting, APRA’s review added. “APRA will not hesitate to take further action where necessary to enforce the provisions of SPS 530 and related regulations, including the responsibilities of relevant accountable persons under the upcoming Financial Accountability Regime,” APRA Deputy Chair Margaret Cole said. The SPS 530 standard requires licensees to establish measurable investment objectives, conduct thorough due diligence, regularly assess investment performance and implement annual stress testing. More

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