Tags: putin | russia | trump | yi

Putin Election Suggests Policy Continuity from Russia

Putin Election Suggests Policy Continuity from Russia

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Monday, 19 March 2018 11:01 AM Current | Bio | Archive

Unsurprisingly, Russian President Putin, who has ruled the country as either president or prime minister since 1999, was re-elected on Sunday by more than 76 percent of the vote. Financial markets did not assume anything else.

This result suggests policy continuity from Russia and policy continuity from foreign countries’ approach to Russia.

Meanwhile, the “Russian affair” in the United States has become a little more heated with a rather active Trump Twitter feed over the weekend. President Trump does not appear to be a supporter of the Mueller investigation and was saying so several times in 240 characters. This probably has limited market implications for now.

There are a few reasons investors would care about an escalation of the “Russian affair”:

First, if the investigation dominates the political calendar and reduces the President’s political capital with Congress halting legislative momentum. This is not a significant financial market risk as there is not that much legislation before the midterm elections and the President’s political capital is perhaps limited anyway.

Second, if the outcome of the midterm elections were to change as a consequence of the Russian affair, this also seems less of a financial market risk, at least for now, as committed partisans on both sides are unlikely to change their views before November.

Third, if there were a credible risk of President Trump leaving office leading to a change in administration direction. This is not a financial market risk that investors are currently contemplating which doesn’t mean if that were to happen, which I still think it will not, then markets could and probable would suffer. 

From the Euro we’ll get today the trade balance for January with the rest of the world and, of course, in the world of financial markets January is a long time ago. In December, the euro area’s exports of goods to the rest of the world was 180.7 billion euro or about $222 billion, which only increased 1.0 percent compared with December 2016.

Nevertheless, the concept of international trade has suddenly become very political and so, the size of the Euro area trade surplus is and will remain important to investors.

The overall current account position of the Eurozone is also supporting the idea of a moderate rise in the value of the euro over the course of this year, which is of course important to investors.

China has appointed the People’s Bank of China Deputy Governor Yi Gang as the new head of the Chinese Central Bank. This move is seen as signaling continuity, advocating change in the domestic financial system.

It is worth remembering that the financial domestic system is basically “closed” in China, so, changes here have only indirect relevance to the rest of the world.

The People’s Bank of China also does not have the same status that other central banks have.

It would be wrong to suggest that this position mattered in the way that the appointment of the head of the Federal Reserve, or the Bank of England (BoE), the European Central Bank (ECB) or the Swiss National Bank (SNB) would matter.

However, financial markets generally do appreciate continuity and that is likely to be focus at least for now.

In the foreseeable future, there is no doubt whatsoever that China’s financial system will change.

One should not overlook the fact that since October 1, 2016, the Chinese renminbi (RMB) has been included in the IMF’s SDR, Special Drawing Rights basket. SDRs are used as an international reserve asset. The weights of the five currencies in the SDR basket are: U.S. dollar 41.73 percent, Euro 30.93 percent, Chinese renminbi 10.92 percent, Japanese yen 8.33 percent and Pound sterling 8.09 percent.

It could interesting to take note that Yi studied besides his time at the Beijing University, he also studied at the Hamline University in Saint Paul, Minnesota and obtained his Ph.D in Economics from University of Illinois. He was also for a period Associate Professor with tenure at Indiana University-Purdue University Indianapolis (IUPUI), which indicates that he knows the United States rather well.

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HansParisis
Unsurprisingly, Russian President Putin, who has ruled the country as either president or prime minister since 1999, was re-elected on Sunday by more than 76 percent of the vote. Financial markets did not assume anything else.
putin, russia, trump, yi
676
2018-01-19
Monday, 19 March 2018 11:01 AM
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