Economy

Ivanna Vladkova Hollar, the IMF mission chief for Egypt, said both sides had made “excellent progress” on the discussions of a comprehensive policy package that could kickstart long-delayed reviews of the country’s economic reform programme.”To this end, the IMF team and the Egyptian authorities have agreed on the main policy elements of the program. The authorities expressed a strong commitment to act promptly on all critical aspects of Egypt’s economic reform program,” Hollar said in a statement.Earlier on Thursday, IMF Managing Director Kristalina Georgieva said the fund and Egypt were in the “very last stretch” of negotiations to increase the country’s $3 billion programme.Egypt has been in talks for the last two weeks with the IMF to revive and expand the loan agreement, which was signed in December 2022.IMF disbursements on the loan were put on hold last year after Egypt did not follow through on a pledge to let the Egyptian pound respond to market forces, and instead fixed it against the dollar in March. The Egyptian pound, fixed at 30.85 to the dollar since then, has been trading on the black market as low as 71 pounds.Hollar, who concluded a two-week visit to Cairo on Thursday, said discussions will continue virtually in the coming days to “identify the magnitude of additional support from the IMF and other bilateral and multilateral development partners needed to help close Egypt’s increased financing gaps in the context of recent shocks.” More

SINGAPORE (Reuters) – The dollar fell broadly on Friday in a bout of positive risk sentiment following upbeat big tech earnings on Wall Street, while traders awaited U.S. jobs data due later in the day to gauge how soon the Federal Reserve could begin easing rates.The closely watched nonfarm payrolls report later on Friday comes on the heels of the Fed’s latest policy meeting where rates were kept steady as expected, though Chair Jerome Powell pushed back against market expectations of rate cuts in March.Ahead of the release, the greenback dipped against a basket of currencies, extending a 0.5% fall in the previous session.The dollar index was last at 103.02 and on track for its first weekly decline for the year.The risk-on mood helped the Aussie tack on 0.17% to last trade at $0.6583, though it was on track to end the week only about 0.2% higher, as its gains were capped by a sharp slowdown in domestic inflation.The New Zealand dollar rose 0.07% to $0.6149 and was on track for a weekly rise of nearly 1%, its best performance in over a month.”If we have a relatively soft payrolls number… then I think you’d probably see the needle move a little bit further back, closer to 50-50″ for March rate cut expectations, Ray Attrill, head of FX strategy at National Australia Bank (OTC:NABZY), said of Friday’s U.S. jobs report.”I think the dollar will be quite sensitive to that.”Market pricing now shows a 38% chance of a Fed cut in March, as compared to an over 70% chance a month ago, according to the CME FedWatch tool. A cut in May is almost fully priced in.”We continue to expect three rate cuts to take place in 2024, with the first cut taking place mid-2024, (followed) by subsequent cuts each quarter,” said Raf Choudhury, investment director of multi-asset at Abrdn.”We do think the market pricing in five or more cuts as soon as March seems ambitious and have more confidence in the dot plots which signal three cuts this year.”Still, the prospect of lower U.S. rates have sent Treasury yields sliding, with the two-year yield, which typically reflects near-term interest rate expectations, last at 4.2086%. It has fallen roughly 15 basis points this week.The benchmark 10-year yield, which has meanwhile tumbled nearly 30 bps for the week, last stood at 3.8840%.Analysts said renewed jitters over regional U.S. banks this week also sparked a flight into the safe-haven Treasuries. Bond yields move inversely to prices. [US/]In other currencies, the yen gained 0.1% to last stand at 146.29 per dollar. It was poised for a weekly gain of nearly 1.3%, its best week in over a month.A summary of opinions from the Bank of Japan’s (BOJ) January meeting out this week showed policymakers discussed the likelihood of a near-term exit from negative interest rates and possible scenarios for phasing out the bank’s massive stimulus programme.That highlighted a growing view within the board that conditions were falling in place to soon pull short-term interest rates out of negative territory, which would be Japan’s first interest rate hike since 2007.Elsewhere, sterling rose 0.09% to $1.2754.The Bank of England (BoE) kept interest rates at a nearly 16-year high on Thursday but opened up the possibility of cutting them as inflation falls.”The (Monetary Policy Committee) – following the Fed – kept the Bank Rate target at 5.25% and dropped the ‘tightening’ bias in favour of a neutral bias,” said Thierry Wizman, Macquarie’s global FX and rates strategist.”But, also like the Fed’s tone… there was a decidedly cautious aspect to the MPC’s communications to counter the switch in the policy bias.”The euro edged 0.07% higher to $1.0879 and was eyeing a weekly gain of more than 0.25%.Data on Thursday showed euro zone inflation eased as expected last month but underlying price pressures fell less than forecast, likely boosting the European Central Bank’s argument that rate cuts should not be rushed. More

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Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.IMF managing director Kristalina Georgieva has praised Argentina’s “very pragmatic” president Javier Milei and emphasised the fund’s confidence in his efforts to overhaul the crisis-stricken economy despite a series of political setbacks.“So far, we have seen a good economic team in place, a very pragmatic president — not ideologically confined, but looking at ways in which the country can move out of this difficulty,” Georgieva told a press briefing in Washington on Thursday, referring to Argentina’s worst economic crisis in two decades.Milei, a libertarian economist who took office in December, has pledged to slash spending and rebuild central bank reserves to get Argentina’s troubled $44bn loan programme back on track. But local analysts have warned that the political outsider, whose party controls less than 15 per cent of congressional seats, may struggle to enact his plans.Milei last week withdrew a set of fiscal measures worth about 1.4 per cent of gross domestic product from a reform bill he is trying to push through Argentina’s congress amid stalled negotiations with opposition lawmakers. The measures were considered crucial to the spending cuts and tax increases equivalent to 5 per cent of GDP that are needed to meet the target of a fiscal surplus of 2 per cent Milei has agreed with the IMF for 2024.A judge ruled earlier this week that a critical section of a presidential decree issued by Milei in December deregulating Argentina’s labour market was unconstitutional.Milei’s withdrawal of the fiscal package was “a pragmatic decision”, Georgieva said. “You move where you have more consensus. We also looked at the consequences of this decision on the appropriate targets and we were satisfied that there is a contingency plan in place.”The stakes of Argentina’s recovery are high for the IMF. Argentina is the fund’s largest debtor, and its package, first agreed in 2018 and refinanced in 2022, had gone “significantly off-track”, Georgieva said in a statement on Wednesday, citing “inconsistent policies” from the previous left-leaning Peronist government. The IMF’s board approved a $4.7bn disbursement of the loan on Wednesday, granting waivers for a series of targets missed under the previous government.The fund also agreed to extend the program by three months from its original September 24 end date, delaying reviews to allow Milei more time to meet targets.The country’s crisis is expected to intensify in the coming months as Argentines feel the impact of Milei’s early reforms, which include a 54 per cent official devaluation of the peso, cuts to energy and transport subsidies, and the removal of price-fixing agreements for food and fuel. Annual inflation in December stood at 211 per cent — the highest in three decades. On Tuesday the IMF downgraded its 2024 economic growth prediction for Argentina to a contraction of 2.8 per cent, citing the likely impact of “a significant policy adjustment to restore macroeconomic stability”.Georgieva, who met Milei in Davos last month, said he had recognised the need for “more social protection” for poorer Argentines. “We have been backing up the Argentine people. We will continue to do so,” she said. “I’m impressed by how open the president and the government is to advice [and] good policy discussions.” More

These financial instruments, including the so-called CRAs, CRIs, LCAs, LCIs, and LIGs, provide income tax exemptions for investors and have experienced significant growth in Brazil over the past few years.Real estate-linked securities LCI and LIG represent a market of 460 billion reais ($93.57 billion), said Felipe Derzi, deputy head of regulation of the financial system at the central bank in a press conference.The government’s assessment indicated that only 15-20% of these securities were initiating new credit operations in line with the original goal intended for the instruments he said, adding that “a reduction in the issuance volume is expected.”LCAs, which are linked to agribusiness, also account for 460 billion reais, said Claudio Filgueiras, head of rural credit regulation, supervision and control at the bank.The changes encompass stricter rules for eligible underlying assets in issuances and will apply exclusively to new operations, said the finance ministry and the central bank in a joint statement, adding that the adjustments “aim to enhance the efficiency of public policy in supporting” the sectors.They added that the alterations seek to ensure that the “aforementioned instruments are backed by operations consistent with the purposes that justified their creation and contributing to a more robust credit market.”($1 = 4.9163 reais) More

WASHINGTON (Reuters) -Bipartisan negotiators in the U.S. Senate will release as early as Friday a long-sought – and politically charged – agreement to stem the flow of migrants across the U.S.-Mexico border, setting up a vote next week on a bill that would also provide fresh aid to Ukraine and Israel.But the legislation already faces substantial opposition from Republicans in the Senate and the House of Representatives who are aligned with Donald Trump, the frontrunner for the Republican presidential nomination.Senator Kyrsten Sinema, one of three bipartisan negotiators who have been working toward a border deal for months, said the emerging agreement will end the practice of releasing migrants caught crossing the border illegally, provide emergency authority to shut the border down and revamp the U.S. asylum system.”We are changing the policy dramatically,” the U.S. senator from Arizona, an independent, told reporters.Trump has called on lawmakers to reject any deal ahead of the November elections that will determine control of the White House and Congress. But Senate Majority Leader Chuck Schumer, the top Democrat in Congress, announced that an initial Senate vote on the supplemental aid package will take place no later than next Wednesday.”We cannot simply shirk from our responsibilities just because the task is difficult,” Schumer said on the Senate floor. “These challenges at the border and Ukraine and the Middle East are just too great.”Schumer said the text of the bill would be released no later than Sunday.President Joe Biden asked Congress in October to approve a $106 billion emergency spending bill, including $61 billion for Ukraine as it battles Russian invaders and $14 billion for Israel in the aftermath of the Oct. 7 raids by Hamas. That request has been stalled by Republicans’ insistence that it be tied to an unrelated shift in immigration policy.The U.S.-Mexico border is a top issue for Republicans, with record numbers of migrants caught illegally crossing into the United States since Biden, a Democrat, took office in 2021. The U.S. Border Patrol arrested about 2 million migrants at the border in fiscal-year 2023, similar to record-breaking totals during Biden’s first two years in office.Immigration also ranks as the second-greatest worry for Americans, according a Reuters/Ipsos poll published on Wednesday. Some 17% of respondents said it was their top concern, a sharp increase from December. Schumer’s announcement came a day after House Speaker Mike Johnson, the top Republican in Congress, cast doubt the future of any Senate border agreement, saying Biden does not need new laws to tackle the problem.”From what we’ve heard, this so-called deal does not include transformational policy changes that are needed to actually stop the border catastrophe,” Johnson said. But some Republicans take issue with fellow party members who have attacked the legislation without knowing what is in it.”There are some in the Senate and in the House who are desperately trying to sabotage it,” Representative Dan Crenshaw, a Republican from Texas, told reporters, suggesting that blind Republican opposition was mainly about not helping Biden escape the issue in the November election. “They’re making it seem like the rest of us are against the bill. But that’s just not true,” Crenshaw added. “I want to secure the border. That’s what I told my voters I would do.” More

NEW YORK (Reuters) -Changes last week to a Federal Reserve lifeline for banks should not impair the facility’s ability to provide liquidity to banks that still genuinely need the cash, and also have appeared to deter a steady rise in borrowing over recent months, market analysts believe. That is because the facility, known as the Bank Term Funding Program, or BTFP, still offers fairly easy terms conditions to access it even as it now costs more to borrow from the central bank, the analysts said. That is important, since over recent days some regional Fed banks have run into challenges that have in turn stoked worries about the sector, thus raising questions whether the central bank was premature in tightening access to the BTFP. Just over a week ago, the Fed raised the borrowing rate on the BTFP, an effort launched in March to provide easy cash to eligible banks amid the high-profile implosion of Silicon Valley Bank, which in turn had raised fears of broader banking sector stress. The BFTP borrowing rate now matches the interest on reserves rate at 5.4%, representing around an immediate half-percentage-point rise in borrowing costs for those aiming to take on new BTFP loans. The Fed also affirmed the program would shut down as planned on March 11.Raising the rate was widely viewed as a way to arrest a vexing rise in borrowing at the facility despite no apparent signs of bank stress. The change appears to have had some impact, with banks borrowing $165.2 billion from the facility as of Jan. 31, from $167.8 billion on Jan. 24. By raising the rate, the Fed in theory closed off what had been an ability by banks to borrow cheap cash from the Fed and lend at higher rates in private markets or even to the Fed itself. The BTFP borrowing rate is now higher than the rate seen on many private money market securities and matches what the Fed pays banks to park reserves at the central bank.Borrowing at the BTFP has “probably peaked” given the new terms and the retreat in usage was “what you would have expected,” said Steven Kelly, associate director of research at the Yale School of Management’s Program on Financial Stability. Raising the rate “was the right move,” said Joseph Wang, chief investment officer at Monetary Macro. Moving the BTFP rate to the interest on reserve rate “weeds out the opportunistic borrowing and leaves those that actually need the cash.” Derek Tang, an analyst with forecasting firm LH Meyer, also believes the facility remains in a good place to provide support, noting banks have been using it “not because of the lower BTFP rate…but because BTFP was so much looser with collateral valuation and margin, and that hasn’t changed.”Despite jittery markets, Fed officials do not themselves appear concerned about the health of the banks. That confidence appeared to embolden policy makers to take out of the Federal Open Market Committee policy statement released Wednesday language describing the banks as “sound and resilient,” words first employed in the March 2023 statement and carried forward until the latest FOMC gathering. More

(Reuters) – A look at the day ahead in Asian markets.Asian markets on Friday will look to take heart from Wall Street’s bounce on Thursday, ending a rocky week on a steadier footing as investors digest the latest twists in the U.S. rate outlook, China’s travails and Japan’s solid start to the year.China’s CSI 300 index of blue chip stocks will likely close in the red this week, but a gain of around 0.5% will avert the biggest weekly fall since October, while the MSCI Asia ex-Japan index is on track for a slender weekly gain.Japan’s Nikkei 225 fell on Thursday but still closed out January with a gain of 8.5% and a series of fresh 34-year highs, while the yen’s 3.6% fall was its biggest monthly depreciation in almost a year. A bit of consolidation on both fronts on Friday and into next week would not be a huge surprise. Or shouldn’t be. The regional economic and policy calendar on Friday is light with only South Korean consumer inflation, Australian producer price inflation and Singapore’s manufacturing PMI on tap, leaving investors to take their cue from global markets.That should mean a feel good factor runs through Asia at the open on Friday after Wall Street’s big three indices rebounded 1% or more on Thursday. Earnings reports from tech giants Apple (NASDAQ:AAPL), Amazon.com (NASDAQ:AMZN) and Meta Platforms (NASDAQ:META) after the bell on Thursday generally beat analysts’ expectations, which should add to that positive sentiment.All this will help wash over the flurry of worry around U.S. commercial real estate and regional banks – at least for now – although that part of the market remains under pressure. The KBW Regional Banking index fell 2%, following its 6% slide the day before. Asian currencies, meanwhile, end the week better bid as the dollar’s gentle drift lower continues. The decline has been nothing major, but the momentum that pushed the greenback higher across the board in the early part of the year has definitely faded.The main reason is probably the slide in U.S. bond yields – the 10-year yield retreated to 3.86% on Thursday, its lowest this year – although there appears to be a bit less conviction in the market’s dovish outlook for the Fed this year. A higher-than-expected reading of South Korean inflation could give the won a shot in the arm on Friday. Here are key developments that could provide more direction to markets on Friday: – South Korea inflation (December)- Australia PPI inflation (December)- Singapore manufacturing PMI (January) (By Jamie McGeever; Editing by Bill Berkrot) More