2025-09-12 10:28

LONDON, Sept 12 (Reuters) - The British pound dropped against the dollar on Friday after data showed the economy had stagnated in July, although it was still set for its second weekly rise before a Bank of England policy meeting next week. UK gross domestic product remained unchanged in July after growing 0.4% in June, the Office for National Statistics said, as manufacturing output, which makes up 9% of the economy, dropped by 1.3% on the month. Sign up here. "These GDP numbers are very volatile but the trend is a little bit softer over the last few months than it was earlier in the year," said Dominic Bunning, head of G10 FX strategy at Nomura. "It's a relatively volatile series that isn't going to make the BoE concerned." The pound was down 0.2% against the dollar at $1.3553, but was still set for a 0.3% weekly rise. The BoE is widely expected to keep its benchmark Bank Rate unchanged on September 18, after a split decision to lower the rate to 4% in August. Investors instead were focusing on the central bank's plans to reduce its bond holdings, known as quantitative tightening, which are announced at the September meeting every year. The BoE has reduced its bond holdings by 100 billion pounds ($135.32 billion) over the past year and Governor Andrew Bailey said earlier this month that the future pace of QT was an "open decision". A BoE survey of investors last month showed a median expectation that the central bank will slow the pace over the next 12 months to 72 billion pounds. A reduction to 75 billion is "unlikely to rock the boat," ING analysts said in a research note. If the BoE were to keep the pace of bond sales unchanged, gilts could come under pressure, pushing yields higher, said Nomura's Bunning. "Generally speaking, big moves higher in gilt yields, particularly long-end ones, are associated more with sterling weakness than with sterling strength," Bunning said. "There is a bit of tail risk here for sterling." Against the euro , the pound fell 0.1% to 86.51 pence but remained within its recent range. ($1 = 0.7390 pounds) https://www.reuters.com/world/uk/sterling-slips-economy-stagnates-eyes-boe-2025-09-12/

2025-09-12 10:25

IEA expects oversupply to increase with OPEC+ output boost Prices supported by Chinese buying and war risks Brent and WTI benchmarks fell sharply in previous session Sept 12 (Reuters) - Oil prices steadied on Friday as concern about oversupply and weaker U.S. demand were offset by supply disruption risks from conflict in the Middle East and Ukraine. Brent crude futures rose 42 cents, or 0.6%, to $66.79 a barrel by 1020 GMT and U.S. West Texas Intermediate crude gained 31 cents, or 0.5%, to $62.68. Sign up here. The Brent and WTI benchmarks fell by 1.7% and 2% respectively on Thursday. "Brent crude is essentially flat on the week, but after a volatile ride ...(which) reflects the market's ongoing struggle to balance growing surplus risks against persistent geopolitical uncertainty and resilient refined product margins," SEB Research analyst Ole Hvalbye said in a note. A monthly report from the International Energy Agency on Thursday said that global oil supply would rise more rapidly than expected this year because of planned output increases by the OPEC+ group comprising the Organization of the Petroleum Exporting Countries and allies such as Russia. However, OPEC's own report later in the day made no change to its relatively high forecasts for oil demand growth this year and next, saying the global economy was maintaining a solid growth trend. While there is a risk of a tumble in oil prices, factors such as tightness in the distillates market, sustained buying from China to fill inventories and potential sanctions on Russia and secondary sanctions on its customers are keeping the market supported, said PVM Oil Associates analyst John Evans. A drone attack on Russia's northwestern port of Primorsk - one of the country's largest oil and fuel export terminals - set fire to a vessel and a pumping station on Friday, the regional governor said. On the supply side, India's largest private port operator, Adani Group, has banned tankers sanctioned by Western countries from entering all of its ports, three sources told Reuters and documents show, potentially curbing Russian oil supplies. India is the biggest buyer of Russian seaborne oil, mostly shipped on tankers that are under sanctions by the European Union, United States and Britain. https://www.reuters.com/business/energy/oil-prices-steady-oversupply-expectations-offset-risks-output-2025-09-12/

2025-09-12 10:25

HONG KONG/BEIJING, Sept 12 (Reuters) - China's top legislature on Friday passed a bill to strengthen the country's food safety law, improving regulatory oversight and imposing stricter penalties for violations, state broadcaster China Central Television (CCTV) reported. The amendment, which will come into effect on December 1, focuses on regulating the bulk road transportation of key liquid foods and infant formula liquid milk, CCTV said. Sign up here. The amended law stipulates a licensing system for operating bulk road transport of key liquid foods, and lays out the responsibilities of consignors, consignees and road transport operators. It places infant formula liquid milk under the same registration management as that for infant formula powder, requiring manufacturers to follow registered formulas and processes. Food safety has improved in China in recent years following a series of scandals but an incident in July drew widespread attention. More than 200 children were found to have abnormally high levels of lead in their blood in the northwestern province of Gansu, after consuming kindergarten food which was found to have lead inside. Other scandals have included the 2008 discovery of toxic infant milk, which undermined public trust and consumer confidence. China's food safety law was first initiated in 2009 before an overhaul in 2015. It has since been amended in 2018 and 2021. https://www.reuters.com/business/healthcare-pharmaceuticals/china-passes-bill-improve-food-safety-2025-09-12/

2025-09-12 10:14

MUMBAI, Sept 12 (Reuters) - The Indian rupee climbed on Friday, as a key U.S. inflation data came in line with expectations and reinforced bets that the Federal Reserve will cut interest rates next week. The rupee ended 0.19% up at 88.2750 on Friday from the close of 88.4425 on Thursday - a record closing low. Sign up here. Friday’s move ended a volatile week, during which the rupee stayed largely below the 88-mark, weighed down by persistent portfolio outflows and U.S. tariff-related uncertainties. The local unit has been under steady pressure since the U.S. imposed additional punitive tariffs on Indian imports last month over the purchase of Russian oil. To curb the impact of the levies, Indian Prime Minister Narendra Modi rolled out consumption tax cuts. Both U.S. and India are also looking at resuming negotiations to address the trade barriers. “The rupee...remains caught between domestic trade and capital pressures and global dollar moves shaped by U.S. inflation and Fed policy,” said Abhishek Goenka, founder and CEO of IFA Global. While the Indian central bank has been intervening through state-run banks to smooth volatility, it is not defending a specific level, leaving the currency outlook fragile, Goenka said. Thursday's U.S. inflation data, seen as supportive of rate cuts, prompted traders to price a 90% chance of two more moves this year. The Fed last lowered rates in December 2024. Strengthening prospects of U.S. rate cuts has propped up currencies across Asia, with the Malaysian ringgit and the Indonesian rupiah leading the gains, as lower borrowing costs weaken the dollar and draw more money into high-yielding emerging markets. The U.S. dollar index was up 0.15% as of 1535 IST. https://www.reuters.com/world/india/rising-bets-fed-rate-cut-lifts-rupee-2025-09-12/

2025-09-12 10:09

SHANGHAI, Sept 12 (Reuters) - China's central bank said on Friday it plans to better regulate cross-border yuan financing between banks, and promote offshore use of the Chinese currency. China is ramping up the pace of yuan globalisation as Beijing seeks to reduce its reliance on the U.S. dollar amid simmering trade and geopolitical tensions with Washington. Sign up here. The People's Bank of China (PBOC) said in draft rules that it will introduce a counter-cyclical mechanism to manage cross-border, interbank yuan financing. The PBOC also encourages domestic banks to exploit their full potential in cross-border yuan financing, and will set a business ceiling that ensures "adequate room for growth." The draft rules were designed to "further support cross-border yuan financing by domestic banks, develop the offshore yuan market, and improve macro-prudential management of cross-border capital flows," the PBOC said. Cross-border yuan financing, including lending and bond repo agreements, is the main channel for onshore Chinese banks to pump liquidity into offshore markets and promote overseas use of the yuan. U.S. Treasury Secretary Scott Bessent plans to meet with Chinese Vice Premier He Lifeng and other senior officials next week in Madrid to continue their discussions on trade, economic and national security issues, the Treasury said on Thursday. https://www.reuters.com/sustainability/boards-policy-regulation/china-central-bank-better-regulate-cross-border-yuan-financing-between-banks-2025-09-12/

2025-09-12 10:07

Increased funding pressure expected due to lower bank reserves SOFR seen higher than fed funds by end-September Investors rely on Fed's Standing Repo Facility as a backstop NEW YORK, Sept 12 (Reuters) - A surge in U.S. Treasury bill issuance in recent months has reduced liquidity in the financial sector, stoking investor concerns that funding markets could face a September squeeze. That could create ripple effects through markets by reducing demand for assets like stocks and corporate bonds, and pushing some investors to set cash on the side in anticipation of volatility. Sign up here. Some say there is a mild risk of a repeat of 2019 when a liquidity shortage caused a spike in short-term borrowing rates until the Federal Reserve intervened in overnight markets to alleviate the crunch. "There is some concern that we could have a repeat of September 2019 at quarter-end due to technicals, corporate tax days, and coupon settlements," said Teresa Ho, head of short duration strategy at J.P. Morgan in New York. In September 2019, overnight funding costs in the repurchase (repo) market spiked due to a large drop in bank reserves amid large corporate tax payments and payments for Treasury debt, forcing the Fed to inject liquidity in repo markets. Some measures of liquidity are already signaling stress ahead, such as a higher cost of borrowing cash overnight collateralized by Treasuries. Still, money market conditions are different. The Fed has launched the Standing Repo Facility (SRF) -- that could be tapped by banks for emergency liquidity, and bank reserves - the biggest component of overall financial sector liquidity - are much higher at $3.2 trillion than in 2019. However, the Fed has been shrinking its bond holdings for over three years, drawing attention to liquidity. At the same time, rapid issuance of Treasury bills by the government after the debt ceiling was raised in July, has prompted traders to anticipate potential stress. Pressure could increase around the September 15 corporate income tax date and the end of the September quarter, when traders say banks tend to reduce intermediation activity. "September tends to be one of the more volatile months and so we are really keeping a close eye on repo and front-end funding spreads," said Clayton Triick, head of portfolio management of public strategies at Angel Oak Capital Advisors. Triick is keeping money on the side in case money market volatility leads to wider credit spreads, which he said would be an opportunity to buy more corporate bonds. SEPTEMBER STRESS Generally, an increase in government borrowing coincides with a decline in demand for the Fed's overnight reverse repo facility (RRP), through which money funds lend to the central banks, or with a drop in bank reserves parked at the Fed. These two money pools are monitored by the Fed to assess financial sector liquidity as it continues shrinking its balance sheet through quantitative tightening. "We expect U.S. bank reserves to continue seeing drawdowns in the upcoming months as T-bill net supply increases," Citi analysts said in a recent note, which could lead to a potential liquidity crunch this month. Among the measures of liquidity signaling stress is that the Secured Overnight Financing Rate (SOFR), the cost of borrowing cash overnight collateralized by Treasuries, rose to 4.42% last Friday, the highest in two months, signaling pressure in a key funding market for Wall Street. On Thursday, SOFR pulled back a bit to 4.39%. Meanwhile, the spread between one-month forwards of SOFR and the effective fed funds rate , at which banks lend overnight unsecured loans to each other, stood at minus 7.5 basis points (bps) on Thursday, the most negative level on record. This means that the forwards market expects SOFR to trade 7.5 bps higher than fed funds by end-September, suggesting tighter repo funding conditions. SOFR typically tends to be lower than fed funds by five to 10 bps because the former carries minimal credit risk being secured by Treasuries. Nafis Smith, head of taxable money markets at Vanguard, said while repo spreads are experiencing mild and periodic pressure, these are typically short-lived, in contrast to 2019 when they were persistently elevated leading up to the September dislocation. He added that worries about a 2019-style funding disruption appear "overly pessimistic." DECLINING BANK RESERVES Usage of the Fed's RRP facility has also fallen sharply, from a peak of $2.6 trillion at the end of 2022 to $29 billion on Thursday, leaving bank reserves as the main source of financial sector liquidity. Lou Crandall, chief economist at Wrightson ICAP, said he expects more funding pressure this quarter compared with end-June because of declining bank reserves, which could necessitate higher usage of the Fed's SRF. Fed data showed that banks borrowed $11.1 billion from the SRF last June 30 backed mostly by Treasuries, the largest borrowing since its launch four years ago. Crandall said he expects SRF borrowings as high as $50 billion at end-September. He added that bank reserves could well dip below $3 trillion by end-September as market participants settle a substantial amount of Treasury debt and pay corporate taxes ahead of a September 15 deadline. To be sure, some market players argued that any funding squeeze would be fleeting. Since quarter-end liquidity tightness is expected, the odds of investors being blindsided are slim. "It never seems like funding markets blow out when risks are well-telegraphed," said Jonathan Cohn, head of U.S. rates desk strategy at Nomura. "The market pre-positions, precautionary liquidity is sourced, so you can have these known periods of pressure like a reporting date, that come and go, that don't require any direct Fed intervention." https://www.reuters.com/business/finance/wall-street-braces-quarter-end-liquidity-stress-money-markets-2025-09-12/