Reuters Insider - UK Day Ahead: ECB warns of threats to growth; Brexit papers; Turkey hikes rates

Welcron Hantec

13/09/2018 16:32

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Source: Reuters Insider

Description: The European Central Bank kept its interest rates unchanged and
tweaked its guidance for ending its bond buys. The British government released
its second batch of Brexit papers, which detailed how everything from driving
licences to passports and mobile phone charges will be affected in a no-deal
Brexit. Plus, Turkey hiked interest rates, boosting the lira. On Friday, watch
out for euro zone labour and trade figures.
Short Link: https://reut.rs/2Oi85yb

Video Transcript:

Good afternoon. I'm Angeline Ong, and welcome to your insight into Friday. But
first, central banks take center stage. Let's get you across the latest. The
European Central Bank, as expected, kept its interest rate unchanged. Its
Chief, Mario Draghi, said there's enough momentum in the Eurozone economy now
to keep withdrawing its stimulus package without harming growth. So bond
purchases will be cut in half to EUR15 billion a month. And we saw the Euro
rise after Mr. Draghi said he expects inflation to lift as well. But
withdrawal didn't mean that the bank wouldn't be intervening anymore.
 br/  br/ But let me made clear that it's- when we stop, this doesn't mean
that our monetary policy stops being accommodating. The amount of
accommodation would remain very significant, and through our investment
policy, and through our forward guidance, and interest rates. Thank
you. br/  br/ Draghi also warned about threats to growth, as a result of trade
disputes and what he called "other global factors", among them, of course,
Brexit. Now, the Bank of England today also, as expected, kept rates on hold.
Rate-setters voted unanimously to hold rates at 0.75%, after a hike in August.
The bank though highlighted greater financial market concerns about Brexit.
Bank of England Governor Mark Carney speaks in Dublin on Friday. Now the Pound
has touched a one and a half-month high against the Dollar, but that was
helped by a weaker Dollar after softer than expected US inflation data.
Meanwhile, the UK government has published its second batch of Brexit
technical papers. They covered driving licenses, passports, and phone charges
in the event of a no-deal Brexit. Of course, the aim of the government is not
for the UK to crash out of the bloc. It argues that it is important to set out
the realities to the public and businesses should there be no deal. Britain's
Brexit Minister Dominic Raab said getting a deal with the EU is still by far
and away the most likely outcome. But European Commission President
Jean-Claude Juncker reiterated yesterday that the EU's stance remains firm,
that if the UK leaves the bloc, it loses its privileges. Now this morning, the
British Cabinet met for a three-hour session. They discussed the possibility
of flights being grounded and contingency plans for civil unrest if there's a
no-deal Brexit. Dominc Raab has also been writing in the local press about the
risks and disruption of a no-deal scenario. But he warned against
scaremongering and told the EU that the GBP39 billion-exit bill would only be
paid if there is a trade deal. Well, the EU quickly knocked that right back,
saying that bill is not for renegotiation. Well, let's take a look at the
markets and see how they stand as we head into the close. And they haven't
changed much since earlier in the session, possibly because there haven't been
any surprises from the central banks. The FTSEurofirst 300 is up around a
0.25%, DAX is up almost 0.5%, while the FTSE 100 is down around 0.2%. Now,
trade is likely to remain in focus on Friday. Beijing has welcomed America's
offer of fresh trade talks. The expectation of these negotiations gave Asian
markets a bit of a lift earlier today. Well, we spoke to Hantec's Richard
Perry and asked him if the optimism was justified. br/  br/ I'm not
necessarily sure that is- I think in the very near term, we've had a bit of an
uptick in markets, but I don't necessarily think it's going to be all that
sustainable. I think this cloud of the trade dispute continues to rumble on
that. It's going to impact on sentiment. I think in the coming months, until
we get some sort of conclusion to this, whether it plays out in the worst case
scenario with the US going all in on China in terms of its imports or whether
they come to an agreement, and I think that that is likely to come around
probably the midterms that we could get some sort of resolution of this.
 br/  br/ Meanwhile, the Lira firmed after Turkey's central bank raised its
benchmark rate by a hefty 625 basis points. This means Turkey's one-week repo
rate now stands at 24%. Turkey's Monetary Policy Committee has boosted rates
by 11.25 percentage points now since late April in a bid to shore up its
tumbling currency, much to the displeasure of Erdogan, a self-described enemy
of interest rates. br/  br/ Will we not learn? You may determine interest
rates, but you don't determine inflation. Inflation is a result of the wrong
steps you, the central bank, have taken. And who pays the price? The people.
The tradesmen sitting in front of me. br/  br/ European banks with exposure to
Turkey hit session highs after Turkey's rate hike. That's how they look at
this point. On the economic diary on Friday, we've got the latest labor costs
from the Eurozone for the second quarter and July trade figures. And that's it
for now. I'm Angeline Ong, and this is Reuters