USD/CNH Above 7 as China Bites Back in Trade War – Profit & Loss

The FX market was surprised today when the Peoples Bank of China set the onshore USD/CNY rate much higher than anticipated at 6.9225, leading to the offshore USD/CNH currency pair extending gains through 7.00 – a level previously defended by the Chinese authorities concerned about capital outflows and one at which the pair has never traded above.

Trump’s Latest Threat Risks Prolonging Trade War – Financial Times

Donald Trump’s attempt to raise the stakes in his trade war with Beijing by threatening new tariffs on Chinese imports has left the prospect of a deal to end the dispute looking increasingly remote.

‘Mountaintop’ Now Visible in US-Japan Trade Talks: Tokyo Envoy – Asian Nikkei Review

Japan and the U.S. have made significant headway toward a bilateral trade deal in two days of cabinet-level talks, Tokyo’s point man said.

Trade War, RBA Send Yields to Record Low – Australian Financial Review

Slowing economic growth, trade war concerns and a global central bank rate cut cycle have pushed Australian bond yields to record lows with no sign of easing in sight.

Two Fed Officials Say Economy Didn’t Justify Lowering Rates – Wall Street Journal

The two Federal Reserve officials who opposed Wednesday’s interest-rate cut by the central bank justified their views based on the current state of the economy, in separate statements.

Hong Kong Leader Warns City is Becoming ‘Dangerous’ as Strike Paralyzes City – Wall Street Journal

Hong Kong’s leader Carrie Lam said the city was becoming dangerous and unstable, condemning violent protests in her first public comments in two weeks on the political turmoil engulfing the city, as the financial center was thrown into further chaos by a strike Monday morning.

Boris Johnson Prepares for ‘People vs Politicians’ Election – Financial Times

Boris Johnson is ready to face down a challenge from pro-EU MPs who may seek to topple his government this autumn by quietly preparing for a “people versus the politicians” election after the UK has left the EU on October 31, with or without a deal.

Japan Signals it Will Act to Curb Any Excessive Yen Rises – Reuters

Japan’s top currency diplomat on Monday warned investors against significantly pushing up the yen, signaling that Tokyo was ready to intervene in the currency market if excessive yen gains threatened to hurt the export-reliant economy.

Regulatory News

Gorfine to Exit CFTC – Profit & Loss

Daniel Gorfine is leaving his position as chief innovation office at the US Commodity Futures Trading Commission and director of LabCFTC.

Banks Confront Fed on Faster Financial Payments – Wall Street Journal

Big banks are fighting a likely US government effort to speed up how money moves through its payments system, arguing this could derail a private network they have developed.

EU Picks Adroit Handler of Policy and People for IMF – Financial Times

Kristalina Georgieva, the favourite to become the IMF’s new head, is a Bulgarian economist and career technocrat for whom the fund offers a chance to lead a global institution after she missed out on top jobs at the UN and EU.

EU Ponders Fund Managers’ Passporting Activities After Brexit – Financial Times

Thanks to EU regulations known as Ucits, which allow retail funds to be domiciled in one member state and sold across the bloc with ease, fund managers can open an office in one domicile — most often Luxembourg and Ireland — and use this as a gateway to sell in markets such as France, Germany and Italy.

Crypto News

Bitcoin Won’t Be a Global Reserve Currency. But It’s Opening the Box – Coin Desk

Celebrating the 75th anniversary of the Bretton Woods conference is probably not high on the list of priorities for cryptocurrency enthusiasts this month. This is an understandable oversight – the price swings, confusing product launches and whereabouts of Justin Sun are perhaps more compelling.

Grayscale Picks Coinbase for Custody Solution – Profit & Loss

Grayscale, a digital currency asset manager, has picked Coinbase Custody to serve as custodian for the underlying assets for each of its products.

Facebook’s Libra is a Global Reaction to Endless Currency Instability – Forbes

Albert Jay Nock’s pithy statement of what should be obvious came to mind recently while reading Financial Times columnist Rana Foroohar’s failed takedown of Facebook’s proposed Libra currency. 

Why is the US Not Yet a Leader in Crypto Regulation? – Coin Telegraph

Despite being an economic leader, many within the crypto industry argue that the United States in particular has not yet gained a leading position among governments actively working to regulate this new technology. 

Company News

In the FICC of It (podcast) – Profit & Loss

There is one item – and a lot of questions – on the run sheet for this week’s In the FICC of It podcast as Colin Lambert and Galen Stops take a long hard look at the London Stock Exchange Group’s $27 billion for Refinitiv.

LSEG and Refinitiv: Deal of the Century or Disaster Waiting to Happen? – Profit & Loss

With the LSEG/Refinitiv deal one step closer to completion, what are the obstacles standing in its way and how will it all end up?

HSBC CEO Leaves Abruptly After Only 18 Months in Role – Reuters

HSBC announced the shock departure of Chief Executive Officer John Flint after just 18 months in the role, saying the bank needed a change at the top to address “a challenging global environment”.

Japanese Funds Put Record Amounts into Alternatives – Financial Times

Allocations to alternative investments among Japanese pension funds have overtaken their exposures to domestic bonds for the first time in a shift driven by Tokyo’s radical measures to stimulate growth and inflation.

Market Savvy

The Value of a (Strong) Dollar – The Hill

There has been some recent discussion of no longer allowing the markets to determine the value of the dollar by taking actions that affect the dollar to increase exports. But concerns that the dollar is too strong require some deeper thinking regarding the determinants of currency value.

Putin’s Pledge to Ditch the Dollar Is Slowly Becoming a Reality – Bloomberg

Russia is acting on a pledge by President Vladimir Putin to shrink the role of dollar in international trade as tensions sour between Washington and Moscow.

Jobs Report Does Little to Clarify Fed Outlook Muddled by Escalated Trade Tensions – Wall Street Journal

Worries over escalating trade tensions could more than offset any comfort Federal Reserve officials will take from the latest indication of a healthy US labour market.

US-China and Japan-South Korea Trade Wars Undermine World’s Economy – Asian Nikkei Review

Murphy’s Law – which states that anything that can go wrong will go wrong – is now the official economic doctrine of our times.

Illiquidity Will Amplify Magnitude of Next Bear Market – Financial Times

Liquidity is the most overlooked risk in asset allocation. It provides oxygen to markets but unlike other risks it cannot be diversified away.