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People wave British Union Jack flags as they celebrate in Parliament Square on Brexit day in London on January 31.


If it’s autumn with a year-end deadline and a sterling sell-off, it must be Brexit. Britain’s internal market bill, a bombshell which the government readily admits contravenes international law, may wreck its EU divorce treaty, scupper chances of a post-Brexit trade agreement and trigger EU legal action.

Britain’s lower house of parliament starts debating the bill on Monday. While Prime Minister Boris Johnson has an 80-seat majority, internal party rumblings over the bill could well test his authority.

Meanwhile, sterling has lost 4% this month and at $1.28, it may not even be pricing the full risk. Clearer signals come from options markets, where positioning has turned markedly bearish.

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Federal Reserve Board building on Constitution Avenue is pictured in Washington on March 19, 2019.

Leah Millis/Reuters

The Federal Reserve meets on Wednesday for the first time since unveiling its landmark shift to a more tolerant stance on inflation. That move steepened the Treasury curve, lifting longer-dated borrowing costs and expectations the Fed may have to increase purchases of long-dated bonds to tamp down yields.

The gap between 5- and 30-year yields has contracted since hitting three-month highs after Fed chief Jerome Powell flagged the shift on Aug. 27. But 30-year yields , sensitive to inflation expectations, remain elevated - not great news for the battered economy.

Fed purchases of more than $1.5 trillion of shorter-dated bonds during the pandemic have pinned down front-end borrowing costs. Investors will watch for a shift towards the long end.


European Union (EU) flags fly in front of the headquarters of the European Central Bank (ECB) in Frankfurt, Germany, July 8.

Ralph Orlowski/Reuters

The Fed move towards greater inflation tolerance, essentially a pledge to keep policy loose, puts other central banks in a bind. Unless they follow, the dollar’s weakening against their currencies could threaten economic recovery and their inflation targets.

The ECB says euro strength is not yet a concern. But it, along with British and Japanese peers which meet in coming days, may eventually be forced down the Fed’s looser-for-longer route.

No policy changes are expected in Japan and Britain. Still, the Bank of England may flag extending its bond-buying to help an economy reeling from COVID-19 and Brexit.

The Bank of Japan (BOJ) meanwhile must contend with a new premier, likely Yoshihide Suga, who may not hesitate to pressure the central bank over yen strength. Calling for the BOJ to work with the government, Suga said recently he didn’t buy arguments such as negative rates hitting bank profits.

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A screen shows the Brazilian real-U.S. dollar and several other foreign currencies exchange rates in Rio de Janeiro, Brazil, March 18.


Emerging markets have been hot on the heels of advanced peers in cutting interest rates, but inflation pressures driven by weak currencies could force a pause.

Brazil is seen holding rates at 2% on Wednesday. Indonesia too should stand pat, given its debt monetization scheme has knocked the rupiah hard. The rouble’s tumble to four-year lows could induce Russia’s central bank to hold rates at 4.25% on Friday.

Yet South Africa may have little choice but to ease policy further on Thursday, after a data horror show that revealed a record 51% GDP plunge and a huge current account gap.


An Indonesian nurse walks through a football stadium which is being converted into a hospital for Covid-19 patients on Sept. 11 in Jakarta, Indonesia.

ED WRAY/Getty Images

COVID-19 cases are rising again in Asian nations that appeared to have successfully controlled the outbreak. Indonesia’s capital, Jakarta, is back in lockdown and its markets have duly crumbled.

But Indonesia is only part of the story. Trade-and-tourism-dependent stock markets in Thailand, the Philippines, Singapore and Indonesia have shed 18% to 24% this year and corporate earnings are seen sinking by a third. Australian shares are at 2-1/2-month lows, as Asian growth fears hurt commodities.

India, despite a four-month lockdown, has the world’s second-highest number of coronavirus cases. Not long ago, the fastest growing major economy, it will contract 14.8% this year, Goldman Sachs predicts.

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