David Fuller and Eoin Treacy's Comment of the Day
Category - General

    Dollar Advances for a Third Day Versus Euro Before Fed Minutes

    This article by Marianna Aragao for Bloomberg may be of interest to subscribers. Here is a section:

    The dollar climbed for a third day versus the euro before the release of minutes of the Federal Reserve’s latest policy meeting that may provide clues on the path of U.S. interest rates.

    The greenback reached its strongest level since July versus Europe’s shared currency as traders awaited the record of the Federal Open Market Committee’s September meeting for signs that Chair Janet Yellen will raise borrowing costs soon. The odds of a rate increase by year-end have climbed to 68 percent, from 60 percent a month ago, amid speculation a recent surge in oil prices will fuel inflation. A gauge of the dollar held near a two-and-a-half month high.

    “The dollar has already received support over the recent days on comments” from Fed officials, and “the market now wants to look if the minutes are in the same direction,” said Georgette Boele, a currency and commodity strategist at ABN Amro Bank NV in Amsterdam. “If the minutes confirm it, the dollar could get a bit more support.”

    The dollar appreciated 0.3 percent to $1.1025 per euro as of 7:22 a.m. New York time, having touched $1.1010, the strongest since July 27. Bloomberg’s Dollar Spot Index, which tracks the currency against 10 major peers, was little changed, after rising Tuesday to the highest level since July.

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    Baidu is bringing AI chatbots to healthcare

    This article by Selena Larson for Bloomberg may be of interest to subscribers. Here is a section:

    The Chinese search engine launched "Melody" on Tuesday, a chatbot that uses artificial intelligence to help doctors care for patients over text.

    Baidu (BIDU, Tech30) aims to make medical consults more accessible and help patients determine whether or not they should see a doctor in person.

    For instance, if you tell Melody your child is sick, it might ask whether she has a fever or is jaundiced and follow up with additional questions.

    Melody integrates with the Baidu Doctor app, which already lets patients ask doctors questions, make appointments and search for health information. Melody asks the patient preliminary questions and pulls data from digitized textbooks, research papers, online forums and other healthcare sources.

    The app produces a hypothesis regarding treatment options that a human doctor edits and sends to the patient. The self-learning bot will continue to sponge up information and improve conversation as time goes on.


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    Email of the day on Brexit and Fanuc

    A couple of things I have come across this morning which I think are very interesting:

    1/ the article below about the parliament being consulted re the Brexit. As I have already expressed in other emails, governance is the most pressing issue now for the UK; a debate and a vote in the parliament should soothe the impression that many have that the most basic rules of parliamentary democracies have been averted (hence GBP moving up), and that an unelected bureaucracy (this unequivocally is unelected)  has taken control of the country, its citizens life and assets. Good governance and common sense would require a qualified majority to be obtained to move things further, but it is too late for this now and I maintain that the UK will be labelled as a country with unpredictable and subpar governance for a very long time (S&P put it down very elegantly when it downgraded the country credit rating following the referendum saying that it "lead to a less predictable, stable, and effective policy framework in the UK. We have reassessed our view of the UK’s institutional assessment and now no longer consider it a strength in our assessment of the rating.")

    2/Fanuc has finally broken back above the 200-day MA, and rallied. Any international investor - not to mention any UK investor - would already be in profit given the strong performance of the JPY, even if entering the position on the break below the MA. I think it's quite powerful signal, and one worth flagging up.


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    Thailand King Critical, What happens if he dies?

    This article from the South China Morning Post may be of interest to subscribers. Here is a section:

    Thai monarchy observers said the choice of words stood out from previous official updates on the ailing king’s health. The widely venerated monarch enthroned since 1946 has been out of the public eye in recent years due to a range of health issues including renal failure. The palace has released more frequent updates of his health this year.

    Ailing Thai king's health 'not stable' after haemodialysis treatment, palace says
    Commentary from within Thailand about the king’s health and succession plans is scarce because of the country’s tough royal defamation laws, which has seen increased usage under the current military government.

    “This is an extraordinary statement from the Royal Household Bureau. Usually they try to say something positive, not this time,” said Kevin Hewison, a veteran Thai politics expert who is emeritus professor of Asian Studies at the University of North Carolina at Chapel Hill.


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    UK Economic Interests Are Not the Same as Those of Self-interested Business Leaders

    It is striking how the use of certain terms distorts underlying concepts and impairs understanding. The current debate is characterised by a supposedly sharp divide between “soft Brexit” and “hard Brexit”. The defining difference is whether the UK remains part of the single market.

    Whenever it is suggested that we might go for so-called “hard Brexit” it is widely assumed that our economic future will be worse. The underlying idea seems to be that the single market is economically good. Accordingly, if the UK rejects membership of it, this must be because, either we are mad, or we value certain non-economic – and political – objectives more highly than economic prosperity. Prime among these are the control of immigration and the restoration of sovereignty, including escape from the clutches of the European Court of Justice. Accordingly, much of big business, and especially the City, favours “soft Brexit”, implicitly putting prosperity before politics.

    But is it clear that membership of the single market is such a good thing? Most of the world – including the US, China, Canada and Singapore - does not belong to “the” single market nor, come to that, to any other single market. Yet they seem to be rubbing along all right.  Meanwhile, the members of the single market are not doing so well.

    Most of those economists who supported Brexit and wanted to leave the single market – including yours truly – did not make this choice because they believed that certain political gains outweighed economic losses. They believed that in the long run, if not also immediately, leaving the single market would deliver the best economic result.

    This should not be surprising. Along with single market membership comes three significant negatives. Prime among them is the need to submit to all EU rules and regulations. Britain’s leading business organisations have been berating us for years about how cumbersome and costly these are. Why have they now apparently forgotten this?

    Second, if we belong to the single market we are unable to manage our own trade relations with countries outside the Union. We have to impose the EU’s common external tariff and are forbidden from forging trade deals with them.

    Third, we have to pay a membership fee, amounting to about 0.5pc of GDP per annum.

    Those business people and institutions who are confident that belonging to the single market is such a good thing are, on the whole, the same as those who were confident that a vote to leave the EU would bring immediate economic pain. When will they learn that the single market is not all that it is cracked up to be? The UK’s economic interests are not the same as those of established businesses as perceived by their short-termist and self-interested leaders – and loudly proclaimed by their myopic and blinkered lobby groups.

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    Email of the day 1

    On sterling’s current slide:

    Email of the day 2

    On a “hard Brexit”:

    I agree that the intransigent and punishing approach emerging from the EU is actually a blessing for the UK. A rapid 'hard Brexit', in much less than 2 years, may actually be the BEST scenario for our country. Yes there will be losers, and they will kick and scream, but there will be winners too (who will be quieter). In the mid-term I think it likely the winners from Brexit will out-number the losers and we will have a better society too.

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    Email of the day 3

    On UK fracking:

    I fully agree with your comment David. This decision on fracking, if extended across the midlands and north, could do more to bring about the 'Northern Powerhouse' than all the politician's hot air and boondoggles. Those regions could once more become powerhouses of the global economy, especially if EU countries stay with their current policies on fracking. Energy costs in Europe will continue to do enormous damage to competitiveness. The UK can break free.

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    A $7 Trillion Moment of Truth in Markets is Just Three Days Away

    This article by Tracy Alloway may be of interest to subscribers. Here is a section: 

    Not since the financial crisis of 2008 has Libor, to which almost $7 trillion of debt including mortgages, student loans and corporate borrowings, is pegged — experienced such a surge. The three-month U.S. dollar Libor rate has jumped from 0.61 percent at the start of the year to 0.87 percent currently — a 42 percent rise — ahead of money market reform that's due to come into effect on Oct. 14.

    The new rules require prime money market funds — an important source of short-term funding for banks and companies — to build up liquidity buffers, install redemption gates, and use 'floating' net asset values instead of a fixed $1-per-share price. While the changes are aimed at reinforcing a $2.7 trillion industry that exacerbated the financial crisis, they are also causing turmoil in money markets as big banks adjust to the new reality of a shrinking pool of available funding.

    Some $1 trillion worth of assets have shifted from prime money market funds into government money market funds that invest in safer assets such as short-term U.S. debt, according to Bloomberg estimates. The exodus has driven up Libor rates as banks and other corporate entities compete to replace the lost funding.

    Now, analysts are debating whether the looming Oct. 14 deadline will mark a turning point for the interbank borrowing rate, as money markets acclimatize to a new reality.


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