Above: GBPUSD at daily intervals.

Rotation Underway

UK: Bank of England Speakers in Focus

Source: Poundsterlinglive

Singapore's key consumer price gauge rose 0.8% in January from a year earlier, lower than economists' forecasts and the smallest rise in more than three years, official data showed on Monday.

The core inflation rate, which excludes private road transport and accommodation costs, compared with a 1.5% forecast by a Reuters poll of economists.

Headline inflation was 1.2% in annual terms in January, lower than economists' forecasts of 2.15%.

Statistics Singapore said the consumer price index had been rebased to 2024 from 2019. The annual change in the headline inflation rate in December was revised to 1.5% from 1.6%.

Core inflation fell from a peak of 5.5% in early 2023 and eased further late last year. The January rate was the smallest rise since June 2021 when it rose by 0.6%.

OCBC economist Selena Ling said the softer-than-expected core inflation could lead to further easing of Singapore's monetary policy in its next review in April.

Ling said: "While trade frictions may escalate and prove inflationary for economies like the US, the impact on Singapore's imported prices is likely to be mitigated by disinflationary drags due to weaker global demand."

The central bank loosened monetary policy last month for the first time since 2020.

Singapore forecasts GDP growth to moderate to ease to 1%-3% in 2025 from 4.4% in 2024, and core inflation to be at 1.0% to 2.0% this year.

Source: Theedgemarkets

Russia's overheating economy is on the cusp of serious cooling, as huge fiscal stimulus, soaring interest rates, stubbornly high inflation and Western sanctions take their toll, but after three years of war, Washington may just have thrown Moscow a lifeline.

US President Donald Trump is pushing for a quick deal to end the war in Ukraine, alarming Washington's European allies by leaving them and Ukraine out of initial talks with Russia and blaming Ukraine for Russia's 2022 invasion, political gifts for Moscow that could also bring strong economic benefits.

Washington's push comes as Moscow faces two undesirable options, according to Oleg Vyugin, former deputy chairman of Russia's central bank.

Russia can either stop inflating military spending as it presses to gain territory in Ukraine, he said, or maintain it and pay the price with years of slow growth, high inflation and falling living standards, all of which carry political risks.

Though government spending usually stimulates growth, non-regenerative spending on missiles at the expense of civilian sectors has caused overheating to the extent that interest rates at 21% are slowing corporate investment and inflation cannot be tamed.

"For economic reasons, Russia is interested in negotiating a diplomatic end to the conflict," Vyugin said. "(This) will avoid further increasing the redistribution of limited resources for unproductive purposes. It's the only way to avoid stagflation."

While Russia is unlikely to swiftly reduce defence spending, which accounts for about a third of all budget expenditure, the prospect of a deal should ease other economic pressures, could bring sanctions relief and eventually the return of Western firms.

"The Russians will be reluctant to stop spending on arms production overnight, afraid of causing a recession, and because they need to restore the army," said Alexander Kolyandr, researcher at the Center for European Policy Analysis (CEPA).

"But by letting some soldiers go, that would take a bit of pressure off the labour market."

War-related recruitment and emigration have caused widespread labour shortages, pushing Russian unemployment to a record low 2.3%.

Inflation pressure could also ease, Kolyandr added, as peace prospects may make Washington less likely to enforce secondary sanctions on companies from countries like China, making imports more straightforward and, therefore, cheaper.

Natural slowdown

Russian markets have already seen a boost. The rouble surged to a near six-month high against the dollar on Friday, buoyed by prospects for sanctions relief.

Russia's economy has grown strongly since a small contraction in 2022, but authorities expect 2024's 4.1% growth to slow to around 1%-2% this year and the central bank is not yet seeing sustainable grounds to cut rates.

When holding rates at 21% on February 14, Central Bank Governor Elvira Nabiullina said demand growth has long been faster than production capacity, hence the natural slowdown in growth.

The bank's challenge in finding a balance between growing the economy and lowering inflation is complicated by rampant fiscal stimulus. Russia's fiscal deficit ballooned to 1.7 trillion roubles (US$19.21 billion) in January alone, a 14-fold increase year on year as Moscow frontloads 2025 spending.

"...it is very important for us that the budget deficit...remains as the government is currently planning," Nabiullina said.

The finance ministry, which expects a 1.2-trillion-rouble deficit for 2025 as a whole, rejigged its budget plans three times last year.

Carrot & stick

The war has brought economic advantages for some Russians but pain for others.

For workers in sectors linked to the military, fiscal stimulus has sharply raised wages, while others in civilian sectors struggle with soaring prices for basic goods.

Some businesses have seized opportunities presented by huge shifts in trade flows and reduced competition. For example, Melon Fashion Group's revenues have steadily risen as it has ridden the consumer demand wave.

Melon's brands have significantly expanded over the last two years, the company told Reuters, and since 2023, the average size of stores it opens has doubled.

But for many others, high rates pose a serious challenge.

"At current lending rates, it is difficult for developments to launch new projects," said Elena Bondarchuk, founder of warehouse developer Orientir. "The once-wide circle of investors has narrowed and those who remain are also dependent on banks' terms."

Lower oil prices, budget constraints and a rise in bad corporate debt are among the top economic risks facing Russia, internal documents seen by Reuters show. And Trump, though dangling the carrot of concessions over Ukraine, has threatened additional sanctions if no deal is forthcoming.

"The United States has significant leverage in terms of the economy and it's why the Russians are happy to meet," Chris Weafer, chief executive of Macro-Advisory Ltd, told Reuters.

"The United States is saying: 'We can ease sanctions if you cooperate, but if you don't we can make it a hell of a lot worse'."

Source: Theedgemarkets

Officials work at a dealing room of Hana Bank in Seoul, Feb. 24. 

The Korean currency rose markedly against the U.S. dollar Monday to reach its highest level in more than two months ahead of the central bank's rate-setting meeting.

The Korean won was quoted at 1,427.4 won per dollar, up 6.9 won from the previous session.

It marked the highest level since Dec. 10, when the currency was quoted at 1,426.9 won.

The won's strength came as the euro climbed after Germany's conservative leader Friedrich Merz emerged as the winner in Sunday's election.

The Korean currency weakened sharply to stay well above the closely-watched 1,400 won level over the past several weeks in line with the strong dollar, and amid concerns about the impact of the Donald Trump administration's sweeping tariff plan on the Korean economy and businesses.

Market uncertainty also heightened after now-suspended President Yoon Suk Yeol shockingly declared martial law on Dec. 3 and caused political chaos.

On Tuesday, the Bank of Korea (BOK) is scheduled to hold a policy rate-setting meeting. The BOK kept its benchmark interest rate frozen at 3 percent in its latest session last month to ensure financial stability. 

Source: Koreatimes

The Trump administration took aim at China with a series of moves involving investment, trade and other issues that raises the risk ties may soon worsen between the US and its top economic rival.

In recent days, President Donald Trump has rolled out a memorandum telling a key government committee to curb Chinese spending on tech, energy and other strategic American sectors. The administration also called on Mexican officials to place their own levies on Chinese imports — a move that comes after some firms from the Asian nation shifted production to the US neighbour to avoid duties the Republican enacted in his first term.

The US also proposed fees on the use of commercial ships made in China to counter the nation’s dominance in the production of the vessels. Chinese shipping stocks fell on Monday, while the benchmark CSI 300 Index slipped 0.2%. The yuan traded onshore rose 0.1% to 7.2480 versus the dollar as of 4:21pm in Shanghai.

Taken together, the steps amount to the most sweeping, forceful actions targeting Beijing of Trump’s fledgling second term and could complicate a deal to reduce China’s trade surplus with the US that the president has indicated he wants to forge.

The memo containing the order to the Committee on Foreign Investment in the US — a secretive panel that scrutinises proposals by foreign entities to buy US companies or property — seems to be the most impactful of the flurry of moves. Referring to Beijing as a “foreign adversary,” it says the changes are needed to protect “the crown jewels of United States technology, food supplies, farmland, minerals, natural resources, ports, and shipping terminals.”

“This is likely a disappointment for Beijing, which hoped to offer a large-scale investment in the US as a concession in a negotiation,” said Martin Chorzempa, senior fellow at the Peterson Institute for International Economics in Washington. “This calls into question whether the US would be open to that kind of investment.”

China’s expenditure into North America tumbled at the end of last year below levels seen during the worst of the pandemic — a slide likely due to prospective investors waiting to see if Trump would win election in November — and the curbs present a new obstacle to any recovery in that figure.

After the memorandum was released, Beijing urged Washington to stop weaponising economic and trade issues. The US government’s push to strengthen reviews of business ties on security grounds would seriously undermine the confidence of Chinese companies investing in the US, the Ministry of Commerce said.

The memorandum also says the US government should also review a 1984 tax deal with China that frees individuals and companies from double taxation. “Eliminating these kind of treaties just makes things very uncertain and complicated for investors because they don’t know if they’re going to be taxed,” Chorzempa said.

Stocks

The memo also revived an issue related to the accounting practices of some foreign firms, including those trading on American exchanges like Alibaba Group Holding Ltd and JD.com Inc, saying the US government would ensure its rules are being adequately followed. Back in 2022, Beijing and Washington resolved a dispute over accounting practices that could have led to the delisting of companies like Alibaba Group Holding Ltd and JD.com Inc, with US officials saying they had gained sufficient access to audit documents on companies in China and Hong Kong for the first time.

Enforcement of US rules would be “tighter than ever” because of the memorandum, said Winston Ma, adjunct law professor at New York University.

Also, a call in the memo for new and expanded limits on investment from US pension and endowment funds in high-tech sectors in China could affect companies along the Asian nation’s artificial intelligence supply chains, UBS Group AG said in a note. The rule could impact hardware, software and internet firms, strategists including James Wang wrote.

And the Trump administration called for a review of arrangement known as “variable interest entity” that Chinese firms use to list on American exchanges. It also pledged to look into “allegations of fraudulent behaviour by these companies,” without going into details.

Shipping

The outline for a plan for fees on Chinese-built ships that carry traded goods also has mandates requiring that a portion of US products be moved on American vessels. It results from an inquiry into Beijing’s practices in the maritime, logistics and shipbuilding industries that started during the Biden administration and ended with a report days before Trump took office.

China’s share of global shipbuilding capacity has surged over the past decade to account for around half of new builds, partly driven by its own domestic demand for more ships. The country’s fleet was valued at US$255.2 billion (RM1.1 trillion) in January, the biggest total globally, according to the analytics platform VesselsValue. Japan was second at US$231.4 billion, while the US ranked fourth at US$116.4 billion.

Shares of Cosco Shipping Holdings Co, which was earlier blacklisted by the Defense Department over alleged links to the People’s Liberation Army, fell 4.6% in Hong Kong. Orient Overseas International Ltd retreated 3%.

When asked the about the proposed shipping fee at a regular press briefing, Foreign Ministry spokesman Lin Jian said the US should “respect the rule of law and stop their wrongdoing.”

Underscoring the divide between the two economic powers, last week Chinese Vice-Premier He Lifeng expressed “serious concern” over a 10% tariff hike that Trump earlier place on goods from the Asian country. He made the comments in a call with Treasury Secretary Scott Bessent, who raised a host of issues with China, including “economic imbalances.”

China’s US$295 billion trade surplus with the US looms large in the new administration’s list of worries, though Trump has said he may be able to reach a fresh deal with Beijing, following one during his first term. “It’s possible, it’s possible,” he said last week. Trump earlier threatened tariffs of 60% on Chinese goods — a level that would devastate trade between the nations — and has ordered his administration to investigate whether Beijing had complied with the trade agreement clinched in 2020.

The Bessent-He call came weeks after the new tariffs took effect, hitting the entirety of Chinese goods shipped to the US. Trump linked them to complaints over Chinese production of precursors for illicit fentanyl heading to America, exacerbating a deadly opioid crisis.

The rising China-US tensions come as Trump pushes to end the war in Ukraine, a move that started with landmark discussions earlier this month between Trump and Russian leader Vladimir Putin. While China would welcome an end to the war because it would help improve its ties with Europe, it raises the possibility that once the fighting ends Washington would turn its full attention to Beijing.

Source: Theedgemarkets