Greenback Starts New Week Decidedly Mixed, With Brexit Anxiety Weighing On Sterling

Overview: Asian shares recovered from opening losses to finish mostly higher, with the Shanghai Composite up nearly 2% and India tacking on 1% after the election was called, starting April 11. European markets, led by energy, communication, and materials sectors, is up about 0.5% through midday. The S&P 500, which closed lower every day last week is looking a little firmer. Benchmark yields are slightly higher, with the US 10-year yield up nearly three basis points at 2.65%. The dollar is little changed but mostly softer against the major currencies, which makes the Norwegian krone's 0.8% gain an outlier.  It was lifted by a higher than CPI, which boosts confidence that Norges Bank can raise rates when it meets on March 21. The US January retail sales report that is to be released today was highlighted by Powell in over the weekend comments. Auto and gas may have held the headline back, but the components for the US GDP are expected to have risen by around 0.6% after 1.7% plunge in December.  

Asia Pacific

Chinese data reported over the weekend included a slightly softer than expected PPI and unchanged CPI (1.5%), while aggregate lending collapsed to CNY703 bln from CNY4635 bln.

However, the data is skewed by the Lunar New Year, and a simple average of the two is still elevated. At the same time, the signal is that the de-leveraging campaign that squeezed the shadow banking is over. The drying of credit from shadow banking appears to be one of the factors that weakened companies in the private sector.  

The anticipated trip to the US by China President Xi at the end of the month has been postponed. As we suspected the US tactics, with its "take it or leave it" stance with North Korea deters Xi's without a deal in hand. Yet we have been told that the only way a deal can be struck is between the two leaders. Nearly every day, the press reports talks are going well, and progress is being made. The currency issue itself seems not to be a major stumbling block. China has pledged not to seek competitive devaluations and spent about $1 trillion in reserves trying to keep the yuan stable. The enforcement mechanism was also going to be difficult. China is insisting that it is two-way, fair, and equal, but at the same time respecting the autonomy of each's monetary policy. Recall that as the US launched QE, some argued that US monetary policy was instigating a currency war. 

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Read more by Marc on his site Marc to Market.

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