Big News this week
The Deal That Saves ZTE!!
The US announced lifting the American sanctions on the Chinese telecommunications giant ZTE allowing them to get back into the business. The Commerce Secretary Wilbur Ross said ZTE agreed to Commerce Department’s $1.4 billion fine including $400million to escrow. The deal also allows the U.S. to closely inspect the company by installing their own compliance team. However, the agreement only suspends the ban for ten years and can be reactivated by the Commerce should the company commit additional violations. This deal will be significant as some experts believe the agreement is a pre-requisite for future trade talks between China and the U.S. Furthermore, the U.S. needs China’s help with denuclearisation negotiation with Kim Jong Un on the June 12 summit.
Emerging Markets Panic
Fed’s continuous tightening of its monetary policy (rate hikes expected in next week’s FOMC meeting and shrinking of Fed’s Balance Sheet) making Emerging Markets scrambling, trying to protect their currencies from strengthening of the USD and speculative attacks by investors. Turkey’s central bank ramping up its benchmark interest rate by 125 basis points to 17.75%, Brazil’s central bank sold extra foreign-exchange swap contracts for the second time this week, other developing nations from Argentina to India defends itself with their monetary tightening. Unfortunately for all these central bankers (even with their best efforts in protecting their currencies) Japan and Europe will bring further uncertainty as they normalise their monetary policy.
Other Important Events
■ Malaysia’s Central Bank Governor, Muhammad Ibrahim, offered to resign after two years into his term. The reason for his resignation is due to a 2 billion ringgit land purchase from Najib’s government to pay off debts of 1MDB. Other news regarding 1MDB, Malaysian Anti-Corruption Commission has issued arrest warrants for Nik Faisal Ariff Kamil (a former official at 1MDB), Shahrol Halmi (a fund’s ex-chief), and Roger Ng (a former Goldman Sache banker).
■ The Reserve Bank of Australia announced to keep the interest rate at 1.50%. The Australian Bureau of Statistics published the March quarter GDP grew by 1%. The growth was higher than expected from the market, illustrated with the 0.7% increase on Wednesday. However, AUD was over-bought and quickly retract to its original price level.
Up-Coming Events
■ June 8 (today) will be the start of the G7 summit. The summit is set in Quebec, Canada. The G7 summit will mainly focus on three themes, the first on gender diversity in global capital markets, another on strengthening expertise in sustainable infrastructure, and the last on financial disclosures to create sustainable change. The U.S. president will find himself isolated from the rest of the leaders, as issues such as the steel tariffs, Iran sanctions, and climate change have made him unpopular with the other leaders. President Emmanuel Macron of France even warned that he would not sign the summit’s traditional joint statement unless progress is made on tariffs and other contentious issues.
■ World’s major oil producers will meet in Vienna on June 22. The OPEC’s production policy will dominate the agenda. Reportedly, Saudi Arabia and Russia are ready to increase the oil output, while countries such as Iran and Iraq are against such a move. Thus some believe it would be one of the worst “OPEC” meetings since 2011.
■ The time is finally set for the U.S. – North Korea Summit. During Monday’s White House press briefing, Press Secretary Sarah Huckabee Sanders announced the summit would be held 9 am Singapore time(9 pm EST) on June 12.
■ European Central Bank is set to meet on June 14 regarding their monetary policy decision for the upcoming quarter. Policymakers anticipate a pivotal discussion on the topic of when they intend to end the bond-buying program. The EUR/USD is likely to continue with its upward momentum in the upcoming week.
Video of the Week
This information is subject to change without notice. BlackBull Markets strives to provide the most accurate information available, but cannot guarantee that any of these events will occur nor that the outcome will be as stated. This information is to be used for educational purposes only and further research should be done before trading.
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