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JPMorgan predicts the decline of the dollar era





The position of the greenback in the foreseeable future may falter, and it even runs the risk of losing the status of the main global reserve currency, analysts at JPMorgan Chase warn.


"The dollar has been the main global reserve currency for almost 100 years. During this time, many investors, including those outside the United States, have become accustomed to the fact that dollar assets occupy a "higher than market" share in their portfolios. However, we believe that the US currency may lose its unique status due to structural and cyclical reasons, which will lead to a decline in its rate," representatives of the financial institute said.


"After the end of World War II, the United States became the largest global economy, accounting for a quarter of global GDP. If we add the countries of Western Europe, then this value will increase to 40%. Since then, fast-growing Asia, in the heart of which China is located, has consistently won back the share of the world market from the West, "they added.


According to experts, as the Asian region develops, the share of transactions in currencies other than the dollar will inevitably grow.


"In addition, the current US administration has questioned agreements with all major US trading partners - from Mexico and Canada to China and the EU, and also left the Trans-Pacific Partnership. Such unfriendly actions on the part of Washington can induce these states to reduce the share of the dollar in trade calculations," noted JPMorgan experts.


They believe that the permanent fiscal and trade deficits of the United States can trigger a decline in the dollar against a basket of currencies and gold, and advise investors to diversify their portfolios so that they prefer other currencies in developed markets and in Asia, as well as precious metals.


However, according to analysts, selling the dollar immediately is also not worth it, because shifts in preferences in financial markets take a very long time, so those who are counting on a quick weakening of the US currency should have extraordinary patience.


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UK Private Sector Activity Continues To Contract: CBI





The UK private sector activity continued to fall in three months to July but at a slightly slower pace, the monthly growth indicator from the Confederation of British Industry showed Sunday.


The balance of firms posting growth came in at -9 percent. This was the ninth straight rolling quarter of either flat or falling volumes.


Services activity logged a slower decline amid a marked decrease in both distribution and manufacturing volumes.


Nonetheless, private sector growth is forecast to pick up, with a balance of 9 percent expecting an improvement in the three months to October.


The growth indicator suggested a subdued start to the third quarter, following other recent data which indicated economic growth slowed noticeably in the second quarter of 2019.


"A new Prime Minister marks a fresh start and early signals matter," Annie Gascoyne, CBI director of economic policy, said. "Business is looking for a Brexit deal that unlocks confidence; clear signals the UK remains open to the world; and a willingness to work together with business on issues ranging from climate change to digital connectivity."

Japan Industrial Production Slides 3.6% In June





Industrial output in Japan was down a seasonally adjusted 3.6 percent on month in June, the Ministry of Economy, Trade and Industry said in Tuesday's preliminary reading.


That missed forecasts for a decline of 1.8 percent following the 2.0 percent gain in May.


On a yearly basis, industrial production sank 4.1 percent - again missing expectations for a drop of 2.0 percent after sliding 2.1 percent in the previous month.


Upon the release of the data, the METI maintained its assessment of industrial production, saying that it continues to fluctuate indecisively.


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European Economics Preview: Eurozone GDP Data Due





Quarterly national accounts, flash inflation and unemployment figures from the euro area are due on Wednesday, headlining a busy day for the European economic news.


At 2.00 am ET, the Nationwide Building Society is slated to issue UK house price data for July. Economists forecast house prices to rise 0.1 percent annually after climbing 0.5 percent in June.


In the meantime, retail sales and unemployment reports are due from Germany. Economists forecast retail sales to grow 0.6 percent on year in June, slower than the 4 percent increase in May.


At 2.45 am ET, France's Insee releases flash inflation data for July. Inflation is expected to remain unchanged at 1.2 percent.


At 3.00 am ET, GDP from Spain and foreign trade from Turkey are due.


At 3.55 am ET, the Federal Labor Agency is scheduled to issue Germany's unemployment figures. The jobless rate is seen unchanged at 5 percent in July.


At 4.00 am ET, Italy's unemployment figures are due. The jobless rate is expected to rise slightly to 10 percent in June from 9.9 percent in May.


At 5.00 am ET, Eurostat publishes Eurozone GDP, inflation and unemployment figures for the second quarter. The economy is forecast to grow 0.2 percent on quarter, slower than the 0.4 percent expansion in the first quarter.


Flash inflation is expected to ease slightly to 1.1 percent in July from 1.2 percent in June. Economists forecast euro area jobless rate to remain unchanged at 7.5 percent in June.


At 6.00 am ET, Italy's Istat releases GDP data for the second quarter. GDP is expected to drop 0.1 percent on quarter, reversing a 0.1 percent rise in the first quarter.

Philippines Manufacturing Sector Picks Up Steam In July - Market





The manufacturing sector in the Philippines continued to expand in July, and at a faster rate, the latest survey from Markit Economics revealed on Thursday with a manufacturing PMI score of 52.1.


That's up from 51.3 in June, and it moves further above the boom-or-bust line of 50 that separates expansion from contraction.


Individually, new order growth was at its strongest in six months, while employment rose for the first time since February.


Output price inflation was at a two-year low.


With output and sales growth remaining strong, businesses remained optimistic regarding future activity.


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European Economics Preview: Eurozone Retail Sales Data Due





Retail sales and producer prices from Eurozone are due on Friday, headlining a light day for the European economic news.


At 2.30 am ET, the Federal Statistical Office is scheduled to issue Swiss inflation figures. Inflation is seen easing to 0.5 percent in July from 0.6 percent in June.


At 3.00 am ET, retail sales data is due from Hungary. Economists expect sales to grow 6 percent on year in June, after rising 2.6 percent in May.


At 4.00 am ET, Italy's Istat publishes industrial production data for June. Economists forecast output to drop 0.3 percent on month, in contrast to a 0.9 percent rise in May.


At 4.30 am ET, IHS Markit releases UK construction Purchasing Managers' survey data for July. The construction PMI is forecast to rise to 46.0 in July from 43.1 in June.


At 5.00 am ET, Eurostat releases euro area retail sales and producer price data. Sales are forecast to grow 0.2 percent on month in June, reversing a 0.3 percent drop in May.


Economists expect producer prices to climb 0.8 percent annually in June after rising 1.6 percent a month ago.


In the meantime, Italy's retail sales data is due for June. Sales had decreased 0.7 percent on month in May.


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Australia's Service Sector Growth Moderates In July





Australia's service sector growth momentum slowed at the start of the third quarter driven by a weakening trend in new business inflows, data from IHS Markit showed Monday.


The Commonwealth Bank of services business activity index fell to 52.3 in July from 52.6 in June.


The overall sales growth moderated in July as domestic demand conditions softened despite a solid increase in new export business. Further, service related jobs fell at the steepest pace in the series history.


On the price front, data showed that input price inflation was the fastest for nine months driven by greater energy costs. Meanwhile, output price inflation remained moderate in July.


Service providers remained upbeat about longer-term prospects as sentiment towards the year-ahead outlook stayed in positive territory. Reflecting softer expansions in manufacturing and services, the composite output index declined to 52.1 in July from 52.5 in June.


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Australia Has A$8.036 Billion Trade Surplus In June





Australia posted a merchandise trade surplus of A$8.036 billion in June, the Australian Bureau of Statistics said on Tuesday.


That beat expectations for a surplus of A$6.0 billion and was up from the upwardly revised A$6.173 billion surplus in May (originally A$5.745 billion).


Exports rose A$576 million (1 percent) to A$42,378 million. Non-rural goods rose A$758 million (3 percent). Rural goods fell A$170 million (4 percent) and non-monetary gold fell A$37 million (2 percent). Net exports of goods under merchanting remained steady at A$18 million. Services credits rose A$26 million.


Imports fell A$1,287 million (4 percent) to A$34,342 million. Capital goods fell A$600 million (9 percent), consumption goods fell A$450 million (5 percent) and intermediate and other merchandise goods fell A$366 million (3 percent). Non-monetary gold rose A$132 million (28 percent). Services debits fell A$2 million.


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The greenback receives a "black mark" from Trump





Last week, the United States announced the introduction of new tariffs on Chinese imports, in response to which China has allowed its national currency to fall to record lows.


Washington's reaction was not slow. The US administration has officially recognized China as a currency manipulator.


"The goal of China's devaluation of the national currency is to gain an unfair competitive advantage in international trade," the US Treasury said.


China has rejected all the accusations against it.


"This stigma is completely inconsistent with the criteria set by the US Treasury for countries engaged in manipulating the exchange rate. Action from the United States is a one-sided and protectionist act that seriously violates international standards. This will have a serious impact on the global economy," according to a statement from the People's Bank of China.


According to analysts, the decision of the US Ministry of Finance to classify China as currency manipulators could lead to the outbreak of a currency war between the two countries.


"The implications of China's recognition of the currency manipulator could be colossal. The United States may use this decision as a pretext for introducing additional unilateral prohibitive duties. This will lead to the closure of all imports from China, " warns professor of Cornell University Esvar Prasad.


It is assumed that if Donald Trump feels that the US economy will slow down against the backdrop of current events, the possibility of conducting currency interventions with the aim of weakening the dollar will again be on the agenda.


Serious pressure on the greenback is currently being exerted by recent expectations that the Fed will aggressively weaken monetary policy.


The probability of a federal funds rate cut by 25 basis points at the September meeting is now estimated at more than 75%. It is noteworthy that a week ago the chances of an additional round of rate cuts were only 60%.


"The US central bank seems to be held hostage by markets for which the expectation of cheap money is the only argument in favor of growth," Raiffeisenbank analysts said.


"There is another important factor - the pressure from the US president, who desperately needs economic growth to be re-elected for a second term and who has been raining tweets on the Fed for more than a year, calling the leadership of the US central bank incompetent and demanding a weaker dollar to win the trade war with China," said MUFG economist Chris Rupkey.


Citigroup believes that if the Federal Reserve cuts rates in an attempt to smooth out the impact of the global GDP slowdown on the US economy, the monetary policy created by protectionism will not solve the problems.


According to Judy Shelton, who was recently nominated by D. Trump as an official of the FOMC, monetary stimulation is more effective for manipulating currencies than for accelerating economic growth. This is again an argument in favor of the fact that by increasing tariffs on Chinese imports, the owner of the White House provokes an escalation of not only trade, but also currency war.


Apparently, the head of the US administration decided to raise rates at the same time both in discussions with the Federal Reserve and with Beijing.


However, for strong EUR/USD growth, just wanting to weaken the greenback is clearly not enough, and buying the euro should be considered only in the event of breaking resistance at 1.133 and 1.137, while a return to support at 1.1175 and 1.112 will create the prerequisites for opening shorts.




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