September Fed Bets Jump to 1-in-3 From Zero as Yellen Speech Key

September Fed Bets Jump to 1-in-3 From Zero as Yellen Speech Key – Bloomberg

Traders see one-in-three odds of higher U.S. interest rates next month as more Federal Reserve officials joined the chorus arguing the case for policy tightening before Chair Janet Yellen speaks Friday in Jackson Hole, Wyoming.

As Central Bankers Gather, Some at Fed Make Interest Rate Rise Case – Reuters

As central bankers converge on this mountain resort Thursday for an annual conference on monetary policy, a couple of top Federal Reserve officials took the chance to renew a push for interest-rate hikes, citing improvement in employment and inflation.

Citigroup: A Trump Victory in November Could Cause a Global Recession – Bloomberg

The election of Donald Trump as President of the United States could lead to chaos in markets and increased policy uncertainty that tip the world into recession, according to Citigroup Inc.

Central Bankers Ponder Moving the Goalposts – Financial Times (subscription)

The aggressive use of monetary tools is as important as the target

Burned by Currency Swings, Mrs. Watanabe Takes a Breather as Yen Rises – Nikkei Asian Review

Having suffered Brexit-related losses, retail foreign exchange traders in Japan are largely steering clear of their typical contrarian bets even as the yen appreciates.

British Economy Escapes Brexit ‘Bomb’, for Now – Reuters

Britain’s high streets are heaving with shoppers despite June’s shock vote to leave the European Union, big companies have reported few signs of distress and some tabloid newspapers are even talking about a post-Brexit economic boom.

Regulatory News

China to Balance Innovation and Risk Prevention: Central Bank Official – Reuters

China will continue to balance innovation and risk prevention in digital finance, a central bank official said on Friday.

UK Resists Expansive View of Mifid II Position Limits – (subscription)

The UK’s Financial Conduct Authority says Europe’s revised Markets in Financial Instruments Directive position limits on commodity derivatives should exempt over-the-counter trades not executed within the EU. Supporters of the position limits plan are concerned with the FCA’s stance.

Iceland’s Carry Trade Trauma Shapes New Currency Regime Limits – Bloomberg

Iceland is about to exit its capital controls, but it probably will never go back to a full, free-floating currency, Finance Minister Bjarni Benediktsson says.

Company News

CME to Add Contract Months for MXN/USD Options – Profit & Loss

CME Group plans to list additional contract months for the options on its MXN/USD futures contract on Globex.

Nigerian Lender UBA Readmitted to Foreign Exchange Market – Financial Times (subscription)

UBA, one of Nigeria’s biggest banks, has been readmitted to the country’s foreign exchange market, following a suspension earlier this week of several lenders by the central bank.

Digicel Earnings Hit by Currency Volatility – Bloomberg

Digicel’s first quarter adjusted earnings before interest, tax, depreciation and amortization (EBITDA) has dropped 8pc as a result of currency swings, citing two people familiar with the matter.

Years of Fed Missteps Fueled Disillusion with the Economy and Washington – Wall Street Journal (subscription)

Once-revered central bank failed to foresee the crisis and has struggled in its aftermath, fostering the rise of populism and distrust of institutions

Market Savvy

Scandi Outlook Mixed for 2H – Profit & Loss

he economic outlook for Scandinavian economies looks mixed in the second part of 2016, with upcoming monetary policy decisions and a potential rebound in oil prices among the factors that may boost economic performance.

Euro May Leave the FX Market Sidelines – Financial Times (subscription)

In a year dominated by sterling’s decline, the yen’s rise and the dollar’s weakness, little impression has been made by the euro — although that may be about to change.

Top Currency Strategy of 2016 Turns Perilous as Risks Rise – Bloomberg

Currency traders basking in the relative calm of August markets just received a jarring reminder of the dangers of chasing high yields.

Popular Investments are Ripe for a Fall – Wall Street Journal (subscription)  

Investors’ complacency after piling into similar positions could be setting up markets for a burst of volatility.

Dudley Says September Hike Possible, Markets Too Complacent

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Dudley Says September Hike Possible, Markets Too Complacent – Bloomberg

The Federal Reserve could potentially raise interest rates as soon as next month, New York Fed President William Dudley said, warning investors that they are underestimating the likelihood of increases in borrowing costs.

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Speculators Mount Largest Short Sterling Position Ever as Pound Keeps Slumping

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Speculators Mount Largest Short Sterling Position Ever as Pound Keeps Slumping – WSJ (subscription)

Bullish bets on the British pound are now among the loneliest positions in global markets. Since the June 23 Brexit vote and the Bank of England’s recent decision to cut interest rates, the currency has depreciated sharply, and most see the selloff going further.

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UK Financial Regulation Faces Post-Brexit Equivalence Dilemma

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UK Financial Regulation Faces Post-Brexit Equivalence Dilemma – Profit & Loss

Financial regulations, particularly for benchmarks, are likely to be materially aligned in the UK and rest of Europe by the time Brexit is completed, however obtaining “equivalence” status for the UK might not be quite as straightforward, a number of sources close to the matter told Profit & Loss in recent weeks, with political reasons potentially playing a role in slowing down the process.

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Barclays Settles Libor Claim in US

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Barclays Settles Libor Claim in US – Profit & Loss

New York Attorney General Eric Schneiderman has announced a $100 million, 44-state settlement with Barclays Bank and Barclays for “fraudulent and anticompetitive conduct” involving the manipulation of USD Libor (London Interbank Offered Rate) and other benchmark interest rates.

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