“Do not try us”
President Trump is around halfway through his tour of Asia now as he meets with the Chinese Premier Xi Jinping. He’ll spend two days in China before visiting Vietnam and, finally, the Philippines. As expected, the focus of his trip is to be North Korea and international trade. Trump has already briefed press in South Korea, calling on North Korea to come to the table and make a deal, before warning the North Korean leadership “Do not try us”. Trump also has a self-imposed deadline of the end of his Asia tour to decide whether to formally sponsor the hermit nation as a state sponsor of terrorism – a move that could heap more pressure on Russia and China to severe economic ties with Kim Jong-Un.
Closer to home, the Democrats have reason to celebrate as Virginia’s gubernatorial race went to Ralph Northam, beating Trump’s pick of Ed Gillespie. While these electoral battles won’t dent the armour of the administration just yet, it’s tangible evidence that the race for the House of Representatives next year could easily fall the way of the Democrats and leave Trump with far less power than he holds now.
Tax reform in the long grass
Reports yesterday that the planned changes to the corporate tax rate by the Trump Administration could be delayed by a full year has seen the dollar wobble slightly lower through the Asian and European sessions.
Trump’s policy process remains one of huge promise, a dollop of invective, followed by a gradual climb-down and then blaming everyone else. Nothing seems to have changed so far as far as the tax plan goes and the dollar’s early exuberance is now being penalised.
Pressure piles on No. 10
Despite UK parliament going on a weeklong break from today, pressure is still mounting on UK prime minister Theresa May as she continues to firefight controversy and indiscretions among her cabinet.
At the time of writing, the UK’s International Development Secretary Priti Patel is on a plane to the UK from Nairobi to meet with her prime minister and justify unrecorded, undeclared meetings with top Israeli officials on a ‘family holiday’. Other reports suggesting that the government had more knowledge on the topic than initially appeared could mean this is far bigger problem for the government. We wait for the plane to land and news to inevitably follow.
The day ahead
Later today, we expect that the RBNZ will keep interest rates on hold at 1.75%, with the central bank reiterating its intention to “remain accommodative for a considerable period of time.” Much like in Australia earlier in the week we would not be surprised if the central bank downgraded its growth forecasts, following on from the poor Q2 numbers. Inflation will likely be revised higher on movements in fuel prices. We would see these moves as relatively NZD negative.
Have a great day.