Sterling surges as Boris Johnson’s Conservative Party is projected to win UK election - CNBC
- The pound jumps more than 2% versus the U.S. dollar after publication of a U.K. election exit poll.
- The Conservative Party would win 368 seats if the poll proves accurate, granting a comfortable majority in Parliament.
- Markets have largely priced in a majority for Prime Minister Boris Johnson’s Conservative Party, with speculative sterling shorts significantly reduced in recent months.
The U.K. general election will be held on Thursday, December 12th, 2019.
Ken Jack | Getty Images News | Getty Images
The U.K. pound jumped more than 2% after an exit poll projected an 86-seat majority for the Conservative Party in the U.K. general election.
Shortly after 10 p.m. London time, a survey of thousands of people who had just left the voting booth indicated that the Conservatives were on course to gain around 50 seats, ensuring a healthy majority.
In reaction the pound rose to $1.3451, more than 2% higher than before the poll was announced, and touched its highest level against the greenback since June 2018. Sterling also jumped against the euro, up 1.4% to 83.265 pence.
The exit poll by Ipsos Mori is commissioned by Sky News, the BBC and ITV and is generally considered more accurate than polls leading up to election day.
How do UK elections work?
The Conservative Party is tipped to gain around 50 seats in the election, while Labour would lose 71 seats from its performance in 2017. In Scotland, the Scottish National Party is forecast to win as many as 55 seats, tightening its grip north of the border.
In a snap research note, Paul Dales, chief U.K. economist at Capital Economics, said the result, if accurate, would free the path for Prime Minister Boris Johnson to push through his Brexit plan.
“If the Conservatives do win a majority, passing a Brexit divorce deal in the coming weeks would remove any risk of a no-deal Brexit on 31st January, reduce the immediate uncertainty and lift business investment at least a bit,” said Dales.
The analyst added that if a big majority over all other parties is realized then Johnson may now have the scope to “ignore the Brexiteers in his party and provide businesses with some certainty by quickly extending the transition period.”
The transition period is currently scheduled to begin as soon as the Withdrawal Deal is passed through Parliament and Britain officially leaves the European Union. That is expected to happen at the end of January. As it stands, the U.K. and EU would then only have until December 2020 to negotiate their future relationship.
Largely priced in
Markets had largely priced in a majority for Johnson’s Conservative Party, with speculative sterling shorts significantly reduced in recent months.
Having fallen below $1.20 in early September after Johnson lost his working majority in Parliament, the pound had recovered around 10% of its value to trade above $1.32 as voters headed to the polls on Thursday, with a final YouGov poll suggesting a 28-seat majority for the ruling party.
The recovery began when Johnson agreed to a new Brexit deal with the EU on Oct. 17. Positive sterling moves ahead of the election suggested that markets were hoping for certainty in the event of a Conservative majority, which would mean Johnson could likely take the U.K. out of the bloc on that withdrawal agreement ahead of the Jan. 31 deadline.
The pound has yet to fully recover from the historic plunge suffered after the U.K.’s landmark vote to leave the EU on June 23, 2016. Before results began to emerge that night, cable had risen as high as $1.50 as traders banked on a vote to remain.
By the time the result became clear, it was down at just above $1.32, around the same level reached on Thursday morning as voters headed to the polls three and a half years later.
South Africa's growth forecasts slashed, recession risk high - REUTERS
JOHANNESBURG (Reuters) - Forecasts for South African growth were slashed in a Reuters poll of economists taken as rolling power shortages got worse, suggesting the poll’s median 40% chance the country has sunk into a recession may be too low.
South Africa’s economy has struggled in the nearly two years since President Cyril Ramaphosa took office. It shrank 0.6% last quarter, the second quarterly contraction in three quarters, and the poll conducted in the past week predicted 0.9% growth this quarter, much slower than the 1.4% forecast a month ago.
While the poll was being conducted, the country has been suffering its most severe blackouts in a decade, indicating the risk to forecasts is likely to be to the downside.
Barclays analysts wrote that they see clear downside risks in South Africa, given the ongoing decline in the South African Reserve Bank’s leading indicator for economic activity.
However, the economy is expected to grow 1.0% next year and 1.4% in 2021, better than this year’s 0.4%, according to the poll of 20 economists.
December will probably show this year’s average change in consumer prices slowed to 4.2%, 0.4 percentage points slower than in 2018.
The South Africa Reserve Bank kept its repo rate unchanged at 6.5% in a close decision last month, saying it wanted to see inflation expectations closer to the midpoint of its 3% to 6% target range.
The central bank will wait until May to cut rates by 25 basis points to 6.25%, which would be only the second cut in two years, the poll said.
The rand has lost over 3% since the year began, but retailers have found ways to avoid passing the cost of falling prices to their consumers.
“Add this to expectations for a benign commodity price outlook (such as oil), inflation is expected to remain moderate during next year,” said Thea Fourie, senior economist, sub-Saharan Africa at IHS Markit.
Consumer inflation will average a little higher at 4.6% in 2020 and 4.7% in 2021, the poll said. But 11 of 15 economists said the central bank overestimated the inflation pass-through from the rand over the past two years.
“SARB models have consistently overestimated this pass-through, thereby overestimating inflation,” said Razia Khan, chief economist for Africa and the Middle East at Standard Chartered.
A separate Reuters poll last week suggested emerging-market currency gains would probably be dominated by high-yielding currencies rather than low-risk bets next year as economic growth finally recovers in response to lower interest rates.
However, the high-yielding rand might not even be part of that theme next year because its central bank has not stimulated the economy as much as other emerging-market central banks.
(Other stories from the December Reuters global long-term economic outlook polls package:)
Editing by Larry King
Factbox: Key figures in Nigerian President Buhari's second cabinet - REUTERS
LAGOS (Reuters) - Nigeria’s President Muhammadu Buhari on Wednesday swore in a new cabinet, three months after starting his second term as leader of the country with Africa’s biggest economy.
Here are some of the key figures in the government led by the 76-year-old former military ruler:
TIMPIRE SILVA - PETROLEUM MINISTER
As minister of state for petroleum, Timpire Silva holds arguably the most powerful ministerial post outside of the presidency due to the key role played by oil in Africa’s largest economy.
President Muhammadu Buhari opted to keep the portfolio of petroleum minister for himself, just as he did in his first term. Buhari took a largely hands-off approach and left Silva’s predecessor - former ExxonMobil executive Emmanuel Kachikwu - to oversee the ministry.
He is widely expected to maintain that approach, which would see Silva represent Nigeria at OPEC meetings and oversee the ministry.
Silva is a veteran of politics in the southern oil-producing Niger Delta region, having served as governor of Bayelsa state in 2007 and as an elected official in the Rivers State House Assembly in the early 1990s.
Prior to his elevation to the cabinet, Silva chaired the governing board of the Oil and Gas Free Zone Authority, a national regulatory body set up to foster public-private partnership investments in Nigeria’s oil and gas free zones.
ZAINAB AHMED - FINANCE MINISTER
Zainab Ahmed was promoted to finance minister in the latter stages of Buhari’s first term, in September last year, having previously served as the junior minister for budget and national planning.
Prior to entering the government, Ahmed burnished her anti-corruption credentials as head of the Nigeria Extractive Industries Transparency Initiative (NEITI). She occupied that role from 2010 until her appointment in 2015 at the budget and national planning ministry.
Ahmed did not deviate from the policies put in place by her predecessor, Kemi Adeosun. And she has signalled that she is unlikely to plot a different course in the near future.
In April, she said Nigeria had no intention of removing costly subsidies on petroleum products after the International Monetary Fund (IMF) advised the country to eliminate them to protect public finances.
Unlike Adeosun, whose role was only that of finance minister with no responsibility for the budget, Ahmed’s role encompasses budget and national planning with the merger of previously separate ministries.
BASHIR MAGASHI - DEFENCE MINISTER
Addressing multiple security problems in Nigeria is one of the main priorities of Buhari’s second term.
In Magashi, Buhari has selected a retired major general who is just two years his junior. The hope is that Magashi’s military background will help with the fight in the northeast against Boko Haram insurgents and militants with ties to Islamic State.
Magashi started his military career as a second lieutenant in 1968. He also served as the commander of a brigade in the northwestern state of Sokoto.
Buhari once referred to himself as a “converted democrat”.
Just as he pursued a career in politics after the military, Magashi also entered politics after retiring as a major general in 1999 and unsuccessfully ran for governor in the north’s commercial hub, Kano state, in 2007.
OTUNBA ADEBAYO - INDUSTRY, TRADE AND INVESTMENT MINISTER
Otunba Adebayo takes control of the trade and investment ministry at a time when Nigeria will need to overcome the apparent inconsistencies of its protectionist policies and being a signatory to the African Continental Free Trade Agreement.
His ministry will also seek to attract new investment after currency controls and multiple exchange rates, in place since 2015, prompted many oversees investors to flee.
Adebayo, whose first career was as a lawyer, is steeped in Nigerian politics. He was deputy national chairman of Buhari’s ruling party in the south of the country. And, prior to that, he was elected governor of southwestern Ekiti state in 1999.
He has replaced one of the few technocrats in Buhari’s first cabinet. Okechukwu Enelamah, Adebayo’s predecessor, was a private equity investor Lagos who co-founded investment and financial advisory firm Africa Capital Alliance.
Reporting by Alexis Akwagyiram; Additional reporting by Felix Onuah in Abuja; Writing by Alexis Akwagyiram and Alison Williams
Nigeria Air still on aviation road map – FG - PUNCH
BY Okechukwu Nnodim, Abuja
Although suspended, the Nigeria Air project is still on the aviation roadmap of the Federal Government, the Minister of Aviation, Hadi Sirika, announced on Wednesday.
He said the proposed national carrier, Nigeria Air, will be implemented, as he was received by employees of the Federal Ministry of Aviation after his inauguration as minister.
“Nigeria Air is still on the roadmap. So, we need your support,” Sirika told his staff.
He added, “One aeroplane that comes into the country means 300 jobs. More than that is the catalyst for the economic growth of our country. It also adds to our gross domestic product.”
The returnee minister said he would further strive to raise the contribution of the aviation sector to the country’s Gross Domestic Product.
“What we have done is that we have raised the aviation contribution to GDP from 0.4 to 0.6 (per cent). I believe that in the coming year, we will get to one per cent at least,” he said.
He added, “I do believe that the aviation sector has a lot for Nigerians; it connects people, countries, continents, markets and be that catalyst that is missing to rejuvenate our economy. Having 200 million people in the centre of Africa is a huge advantage.”
Trump Wants a Weak Currency. Rivals Do Too, and That’s a Problem - BLOOMBERG
Fed rate cuts may not weaken dollar amid global dovishness
Any intervention could face strong countermeasures by rivals
Despite the Fed’s increasing dovishness, the greenback has beaten most Group-of-10 peers this quarter.
Photographer: Paul Yeung/Bloomberg
Major economies around the globe all seem to covet a weaker currency as risks to growth mount. That makes engineering a lower dollar, euro or other heavyweight all the harder.
President Donald Trump has repeatedly badgered the Federal Reserve to cut rates and complained that the U.S. dollar is too strong. But he’s got competition. It might not mention the exchange rate explicitly, but the European Central Bank is poised to loosen policy, weighing on the common currency.
Bank of Japan Governor Haruhiko Kuroda said the bank will “persistently continue with powerful monetary easing” to boost inflation. In China, the central bank looks set to step up stimulus to revive growth.
Thanks to synchronized monetary easing, any simultaneous moves to weaken currencies might cancel each other out -- making beggar-thy-name policies a waste of time.
“Everyone is sort of pushing on the same piece of string,” said Charles Diebel, head of fixed income at Mediolanum Asset Management. “If you have the Fed easing and the ECB easing, it’s just a relative game. It’s very hard for currency volatility to remain elevated.”
Despite the Fed’s increasing dovishness, the greenback has beaten most Group-of-10 peers this quarter. The Bank of Korea surprised markets with a rate cut last week, but the won only weakened briefly. Even though the Swiss National Bank keeps reiterating it has leeway to ease, the franc continues to be buoyant against the euro.
Foreign-exchange strategists say the risk of a U.S. move to weaken the dollar has risen after Treasury Secretary Steven Mnuchin said last week that there’s no change in the nation’s currency policy “as of now.”
Dollar is most expensive G-10 currency.
Welcome to the latest race to the bottom. In 2010, when major central banks were printing money and cutting rates, causing their exchange rates to fall, then-Brazilian Finance Minister Guido Mantega famously labeled it a “currency war.” The difference is that back then, the dollar was falling and other countries tried to catch up with it.
Now, the greenback is among the most overvalued G-10 currencies, according to a Bank for International Settlements model on real effective exchange rates.
A desire among policy makers to expand their toolkit to prop up growth is understandable. The International Monetary Fund has revised down its growth forecast for 2019 repeatedly -- including on Tuesday -- as trade and geopolitical tensions threatened to damp the world economy. Major central banks, including those in Switzerland and Australia, are sticking to a low-rates policy.
“If the U.S. wants a weaker dollar now, they are going to struggle to get that with just the use of monetary policy,” said Kit Juckes, a strategist at Societe Generale SA. “Fed policy is no longer the driver of the dollar -- growth is. A rate cut by the Fed isn’t going to get the euro stronger if the prospect of growth there is weak.”
Any competitive devaluations are naturally fraught with political tensions, while prolonged low interest rates risk asset bubbles and financial repression.
See it as a U.S.-Europe story, according to Stephen Jen, the chief executive officer of Eurizon SLJ Capital. He reckons the BOJ has already done so much easing that it is now worried about the economic effects of sustained negative rates. Meanwhile, the People’s Bank of China may refrain from enacting a large stimulus amid fears it could destabilize the economy over the long haul.
“It’s really the euro and the dollar racing lower,” Jen said in an interview. “The Fed doesn’t really have a strong case to cut at all as the U.S. economy is doing fine. The real issues are happening outside the U.S. That’s a very different situation than the Europeans face. They are facing weakness right there in Germany.”
Markets expect the Fed to announce a 25-basis-point cut in interest rates next week. Despite that, the euro depreciated 1.7% against the dollar this quarter, and is down 2.5% this year.
It’s unlikely that the U.S. would intervene partly because it risks triggering counter-measures by other monetary authorities, said Bilal Hafeez, former head of G10 foreign-exchange and rates strategy at Nomura Holdings Inc. and now the CEO of Macro Hive.
“What’s more likely is that the Fed would cut rates more aggressively” said Hafeez. “But the extent of dollar weakness will be limited because other central banks are becoming more dovish.”
(Adds latest IMF forecast reduction in 10th paragraph.)
ECB signals a rate cut, sends the euro to a 2-month low - CNBC
- The central bank said it expects its key interest rates to remain “at their present or lower levels” at least through the first half of 2020.
- This is an update on the wording in previous statements and suggests a rate cut could be on the horizon.
Mario Draghi, president of the European Central Bank (ECB).
Bloomberg | Bloomberg | Getty Images
The European Central Bank (ECB) kept rates unchanged but altered its forward guidance on Thursday amid deteriorating economic data in the euro zone.
The central bank said it expects its key interest rates to remain “at their present or lower levels” at least through the first half of 2020, updating the wording on previous statements and suggesting a rate cut could be on the horizon.
The bank also signaled that there could be additional measures to stimulate the euro zone economy. It said it was examining options, “including ways to reinforce its forward guidance on policy rates, mitigating measures, such as the design of a tiered system for reserve remuneration, and options for the size and composition of potential new net asset purchases.”
Potential new net asset purchases suggest the central bank could reintroduce its quantitative easing program, where it purchases government bonds from euro zone countries to further stimulate lending and stoke inflation.
On Thursday, the euro zone central bank kept the rates on its main refinancing operations, marginal lending facility and deposit facility unchanged at 0%, 0.25% and -0.40%, respectively. These have been at record lows following the euro sovereign debt crisis of 2011.
Euro fell to an eight-week law after ECB decision.
Traders are now waiting to hear from President Mario Draghi, who is due to speak at 1:30 p.m. London time.
Draghi warned last month that without a clear improvement for the euro zone economy, the central bank would announce further stimulus measures. This caused market players to up their forecasts for new interest rate cuts or even a bond-buying program. Draghi, speaking in June in Sintra, Portugal, made it clear that his institution was ready to use all necessary measures to revamp the flagging economy.
Data out Wednesday further highlighted the recent weakness, showing German manufacturing PMIs (Purchasing Managers’ Index) falling to 43.1 in July from 45.0 in June. At the same time, new orders in the country dropped at their fastest pace since July 2012, on the back of weakness in Chinese demand and in the auto sector.
The ECB had embarked on a major stimulus package following the sovereign debt crisis of 2011. This included cutting interest rates to record lows, purchasing government bonds and facilitating more lending to euro zone banks. The bank tried to normalize its policy last year — and catch up with other central banks like the U.S. Federal Reserve — but with global trade wars and softness in China most of these banks have now signaled a U-turn. In the U.S., investors now believe there’s an 80% chance that the Fed announces a 25 basis point cut when it meets next week.
Facebook's Cryptocurrency Keeps Sounding Worse And Worse, As Insider Leaks New Partners - Visa and Mastercard....
More details have just emerged regarding Facebook's cryptocurrency project, perhaps giving us the most insight so far on the direction they're aiming to take the project.
An insider, speaking to The Wall Street Journal has just leaked some new information on the project, including it's name internally at Facebook, "Project Libra".
We already knew they we're 'going big' with this one - approximately 3 weeks ago we learned about the massive fundraising efforts going on behind the scenes - that's when we first heard the project's $1 billion dollar price tag, and that Facebook would be seeking outside investment to raise it.
The reporter who published that story also dove into Facebook's current job listings and discovered 22 new roles within the company's blockchain department now accepting applications, bringing the total number of department staff from 40 to 62.
If the WSJ's unnamed source is to be believed, we now know some specifics on where that $1 billion will come from - Visa, Mastercard, and a company you may not know by name, but processes many of the payments for both, First Data Corp.
Let's try to look on the bright side:
I know, it's starting to feel like an alliance of the worst corporations coming together to launch EvilCoin - but, this also may potentially serve as a gateway cryptocurrency.
Because Facebook's plan actually reaches far beyond Facebook - they've also been approaching major online retailers and hope to make their cryptocurrency an accepted form of payment at a wide variety of businesses. Rumor is, they're pitching them with a pro-crypro argument I've heard since owning my first Bitcoins - all the money they could save on processing fees.
Now imagine - once a retailer has been coaxed into accepting this cyptocurrency, and sees the cumulative effects of saving the 2%-3% typically lost to credit card companies for processing, why would they stop here?
They'll soon learn there's billion held by potential customers in other cryptocurrencies that offer them that exact same incentive.
It's also going to be a lot harder for anyone to make generalized statements against cryptocurrency's legitimacy, with a Visa and Mastercard in their wallet, and the Facebook app on their phone. Can you really be anti-crypto when everything in your pocket says you're wrong?
It may not be the path to mass adoption we dreamed of, but it's potentially a path nonetheless.
Facebook declined to comment on these latest rumors.
Author: Justin Derbek
New York News Desk
Pound Faces Jolt as Local Elections Give Impetus to Brexit Talks - BLOOMBERG
Both main parties hit by Brexit backlash in local elections
Sterling could gain to $1.32 on a deal being reached: CIBC
The pound has climbed on optimism over a way forward on Brexit and next week may give the currency a decisive push, strategists say.
Sterling ended its best week in two months with a rally on Friday, following a battering in local elections for the two main political parties that could push them toward a Brexit compromise. The pound could either gain past $1.32 if an agreement is struck between the ruling Conservatives and the opposition Labour party, or fall back to $1.29 if Prime Minister Theresa May’s talks fail.
“Currently, cross-party talks are not making progress, but by the middle of next week expectations are that the government will make it a ‘take-it-or-leave-it’ moment for both sides to try and find a way through,” said Jordan Rochester, an analyst at Nomura International Plc. “If they were to find an agreement this would send the pound much higher as the market would price out any hard Brexit risk for October.”
Sterling surged above $1.31 Friday to head for its biggest weekly gain since March, yet is still well below its post-Brexit highs of around $1.43. Bets on pound gains over one month in options markets have turned positive for the first time in a year.
Investors are pinning their hopes for a resolution on the discussions between the two main parties, almost three years since the vote to leave the EU. The Tories and Labour both lost ground in local elections Thursday amid frustration over Brexit, which makes it in their interest to strike a deal. May and Labour leader Jeremy Corbyn both said that the message from the election was to sort out Brexit.
Why Labour Also Needs to Deliver Brexit
How Labour-held constituencies voted in the U.K. referendum
Sources: Brexit vote estimate from Chris Hanretty of UEA; Press Association 2017 election results
The outlook for the Bank of England’s interest-rate path also depends on Brexit. The market barely reacted Thursday to comments from BOE Governor Mark Carney that policy makers would raise rates by more than investors are pricing if Brexit goes smoothly.
Even though any agreement in the talks would have to get through Parliament, the pound would still gain further on the news, according to Jeremy Stretch, head of Group-of-10 currency strategy at Canadian Imperial Bank of Commerce. A “systematic failure” would have a similar impact in the opposite direction, pushing the pound down toward $1.29.
The cross-party talks are due to resume on Tuesday. Traders will also have U.K. growth figures in their sights next week, with gross domestic product expected to pick up to 0.5 percent in the first quarter, from 0.2 percent in the last three months of 2018.
Zimbabwe extends central bank governor's term by another five years - REUTERS
HARARE , May 3 (Reuters) - Zimbabwe’s President Emmerson Mnangagwa on Friday appointed John Mangudya for a second and final five-year term as central bank governor, a government official said.
Mangudya was first appointed to the post in 2014 but his term was marred by the bank’s decision to introduce the surrogate bond note currency two years later in a bid to end a severe shortage of U.S. dollars and cash.
“The extension takes effect from 1 May 2019 for another five years,” Misheck Sibanda, chief secretary to the president and cabinet said in a statement.
Mangudya’s appointment had been largely expected after Mnangagwa’s spokesman George Charamba said the governor would get a second term.
Zimbabwe is gripped by a severe shortage of dollars that has seen the country struggle to import food and medicines for hospitals. (Reporting by MacDonald Dzirutwe, editing by Louise Heavens)
Strategist Who Called Bitcoin Crash Says It's Time to Buy Crypto - BLOOMBERG
Fundstrat’s Robert Sluymer sees longer-term recovery in works
Rally through resistance around 6,000 could come later in 2019
Bitcoin is in the middle of a sustained recovery and investors should use recent weakness to buy more, according to Fundstrat technical strategist Robert Sluymer. The largest cryptocurrency climbed to its highest since November.
“Use pending pullbacks to continue accumulating Bitcoin in the second quarter in anticipation of a second-half rally through ~6,000 resistance,” Sluymer wrote in a note May 2. He sees Bitcoin’s rebound from its 200-week moving average and breakout from its first-quarter trading range as “the early stage of a longer-term recovery developing.”
Bitcoin advanced as much as 7.2 percent to $5,795.50 as of 9:33 a.m. in New York, according to Bloomberg composite pricing. The 55 percent jump in 2019 has helped pull rival tokens higher. Litecoin has soared more than two-fold.
Adding to the overall optimism Friday was a Wall Street Journal report that Facebook Inc. is reaching out to financial companies and online merchants to help launch a cryptocurrency-based payments system tied to the social network.
Sluymer warned in mid-November, when Bitcoin was trading around $5,500, that the asset had suffered “significant technical damage” that could take months to repair. Over the next several weeks, Bitcoin slid to as low as $3,136.04. In February, Sluymer cautioned that the technical position in the crypto space was still weak. Bitcoin didn’t recover the $5,000 level until early April.
Fundstrat was an early mover in analyzing cryptocurrencies and developed its own indexes. And Sluymer’s colleague, Fundstrat co-founder Tom Lee, is regarded as a Bitcoin bull. Lee started 2018 with a year-end price target of $25,000, before eventually abandoning time frames for his predictions in December when it was around the $3,000 to $4,000 range. Lee in March said he sees 2019 as a year the market can “build better risk-reward.”
“While it’s premature to conclude Bitcoin will not retest support near $4,300, we would encourage traders and investors to remain focused on the bullish longer-term technical profile developing,” Sluymer wrote. “Bottom line: use recent weakness to accumulate.”
(Adds report on Facebook in the fourth paragraph.)