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The British Pound is relieved following the defeat of UK Prime Minister Boris Johnson after he asked the British Parliament to start a general election. Earlier, MPs backed a bill aimed at blocking a no-deal Brexit if Johnson hadn’t agreed a plan with the EU ahead of the October 31 deadline. This was despite efforts by the PM after he seeks approval from Queen Elizabeth II to suspend the parliament and leave the bloc even without a deal. On the other hand, the Bank of Canada held its 1.75% interest rate amid central banks cutting rates to minimize the effect of the escalating U.S.-China trade war. However, investors remain silent on the Canadian Dollar as the country will have its federal election in a month. Canadian PM Justin Trudeau is seeking his reelection bid but will have a hard time after he was embroiled in a political scandal where he was accused of pressuring then Justice Minister of dropping the case against SNC-Lavalin.
Germany’s powerhouse economy helped lift troubled neighbors – Greece, Portugal, and Spain – above the turmoil. However, Germany is now on the brink of recession after its economy declined in the year’s second quarter. Most economies are not yet predicting a Eurowide recession, but the are worried about the prospect. The perilous state of the eurozone economy will be an early test for Christine Lagarde when she succeeds Mario Draghi as president of the European Central Bank in October. Fast growing economies like Denmark is not big enough to replace Germany as Europe’s economic locomotive and France is also experiencing slow growth. Danish Krone is also pressured after the cancellation of Trump’s visit to Denmark after PM Mette Frederiksen refused to talk the sale of Greenland. Denmark is expected to fill UK’s role once it leaves the bloc on October 31.
New Zealand is under pressure from the possibility of negative interest rates to a no-deal Brexit. Recently, the Royal Bank of New Zealand (RBNZ) cut its benchmark interest rate by 50-basis point to 1%, the same rate with its neighbor Australia, as concerns of a looming recession forced central banks to adjust their monetary policies. On the other hand, the possibility of a no-deal Brexit will add pressure to the already suffering New Zealand Dollar. New Zealand is also a signatory to the post-Brexit trade agreement, which will make New Zealand Dollar exposed to a weakening British Pound. The British Parliament already passed a bill to prevent the UK from crashing out from the EU without a deal in the event that UK Prime Minister Boris Johnson and the EU leaders didn’t came up with a divorce deal, which will prevent a no-deal Brexit. Analysts were still looking for any optimism as the UK enters new trade deals after the Brexit.
U.S. President Donald Trump accused China of currency manipulation after the PBOC (People’s Bank of China) devalued the Chinese Yuan against the U.S. Dollar to offset the effect of new tariffs imposed to Chinese goods. On August 01, Trump said he will hit the remaining $300 billion Chinese exports with 15% tariff, which further escalates the trade war between the two (2) largest economies in the world. China retaliated on $75 billion American goods, both taking effect last September 01. Despite this, the two (2) economic powerhouse agreed to high-level talks by October, which adds little optimism on traders, sending currencies pegged to the U.S. Dollar to jump. However, this cannot guarantee any agreement between the two (2) sides after their failure to agree during the previous negotiations. In addition, trade truce during the 2018 and 2019 G20 Leader Summit ended with the two (2) countries further escalating the trade war.