At the ecb, Christine Lagarde says the central bank will be resolute on inflation. Manus we kick off bloomberg daybreak europe, waiting to hear exactly what the list of unreliable entities are from the chinese back to the u. S. Alive and well against argentina, brazil, france. That is the market angst in global trade. It is not going down. If anything, we are ratcheting higher. Man back at it, and this is the first time President Trump has explicitly tied tariffs to currency issues. We sigh risk on session yesterday and that started to sour in the u. S. On the terrace risk and on the factory data out of the u. S. After optimism around china. Manus of course, you are quite right. Interesting how his view on currencies the bloomberg john, crazy from like a fox in terms of understanding how currency markets move. The backs rose on a of issues. Socgen says the fed will cut 100 basis points year and the u. S. Faces Recession Risk, and you may see yields drop to 1. 2 . Bloomberg say if you see a drop off in the yield down at 1. 6, you go short with a target of 2. 25 . They say the u. S. Economy is in a healthy space. If you want to understand volatility, look at this. The biggest oneday ratcheting volatility in the u. S. Market since august, because you are seeing that concern about manufacturing and the rest of the world. Index,got the dollar traded below the 100 Day Moving Average yesterday. The dollar just manages to recover this morning. Socgen faceoff on treasuries. Convergence in equity markets. Read on the screen in asia. Yesterday, the s p 500 dropped the most in almost eight weeks. Are seeing a recovery in u. S. Futures today, the emerging from the asian session. Concern around the tariffs and data out of the u. S. Aussie, the bestperforming g10 currencies in todays session. The rba stays on hold but talks about risks receding and says rate cuts are having an impact. Is the market going to reprice on the prospect of more easing . Manus well, theres one clear theme this morning, between the rates of Central Banks and the trade angst. Our top story is trade and tariffs. Mr. Trump has reinstated tariffs on brazil and argentinas steel and aluminum, linking his trade agenda with another thairade against the latin american countries. Alternative suppliers of Agricultural Products to china amidst the trade war. Lets listen to what the president said soon after landing in london for the nato conference. Brazil has really discounted if you look at what has ,appened with the currency theyve discounted the currency by 10 . Argentina also. I gave them a big break on tariffs, but now im taking a break off. Nejra joining us, the senior currency strategist at cba europe. Good to see you, first of all. Thes focus for a minute on fact this is the first time President Trump has linked tariffs with fed action and currencies. We know he has been calling for a weaker dollar. Does that change your strategy at all in terms of how currencies might move on the imposition of tariffs and trade wars . He didnt specifically call but a u. S. Dollar, complained about the currencies in brazil and argentina being overvalued, which to a degree is correct. In the Real Exchange rate, the peso have been. Limited currency market implications from that or Financial Market implications. A bigger deal in terms of what matters for currency is whether the latest the passage of the hong kong democratic law from a bill into a law will derail or jeopardize the prospect of a phase one u. S. China trade agreement. So far, the retaliatory measures from china do not appear to lead to a derailment of this initial trade agreement, so this is still relatively supportive for the Global Growth backdrop but things can change and by the 15th of december, the u. S. Will raise tariffs on the rest of the chinese exports to the u. S. And aat could probably lead to more destabilizing negotiation process between the countries. Manus that is what wilbur ross intimated on the fox news program. When i look at the map this morning from gmm, what we have here is a stoicism in the high delta currency, in the aussie dollar relative to the equity story. That goes back to the central bank credited rhetoric, stronger rba this morning. Currencies are fairly stoic in the face of the trade angst overnight. Elias thats right. The Australian Dollar had its own its own factors pushing it higher, particularly more constructive rba, but the fact it is pulling above 67, the same with the new Zealand Dollar, firm despite the uncertainty on the trade front, it has been in a relatively tight range the last few weeks. Until we have clarity with respect to where the phase one u. S. China trade will take us, i believe those cyclically like the currencies australian and new Zealand Dollar will remain range bound and it will be difficult for them to sustain their latest upswing. Becauses there a risk, as we head to the prospect of a phase one deal and ask whether we will get a pause of tariffs or a rollback, President Trump takes another tack with china, and i want to come back to the currency war because you criticized argentina and brazil for cheapening their currencies. Is it a risk in your mind that even while trump may pause tariffs on china, he starts talking about the u. N. And we start seeing that affected . That is certainly a risk that i believe the treasury has now put china on the list of the currency manipulators. It is certainly a weapon the u. S. Can use if they really want to turn the trade war more nasty, and that is certainly something it is a big risk to the Global Economy going into 2020, but at this stage, it looks encouraging. The big headwinds to Global Growth in 2019, this intensive vacation in trade tensions looks to be easing going into 2020. Risk to some upside Global Growth in 20 20th trade tensions dont worsen. Green chutes if things do get marginally better into 2020 from the growth side, how do you want to be positioned . Is it dare i say it, is a short the dollar . Is it shortly and . Short yen . How do you position for that flourish . Elias if we have a positive surprise to Global Growth, i would be comfortable being long the Australian Dollar against the u. S. Dollar. Same thing with the new Zealand Dollar. All these growth sensitive currencies will outperform most major currencies, including the u. S. Dollar. Nejra pc a weaker dollar for 2020, then. Is that something you would position for now or advise people to take positions in or is that a story for 2020 . Elias that is a story for probably the second half or beyond q1 of 2020. If we start to have a stabilization on the trade probablyfront, the fed delivering a bit more rate cuts than what is anticipated. These will be some of the factors weighing on the u. S. Dollar beyond q1 next year and would give a Good Opportunity to see those cyclically sensitive currencies outperform. , stays with haddad us. To the agenda, live in london. The navajo summit nato but that0th birthday, was before three key players began questioning the foundations of the alliance. Macrons recent criticism has ruffled feathers within nato. The french president has said the alliance was brain dead. The question is if he risks pushing other countries too far. Nejra hes already traded barbs with turkey. European leaders have to choose between endorsing some of erdogans policies in syria or seeing more refugees make their way to europe. Mr. Macron, i call on you from turkey and ill say it at the nato summit too, you should get checked whether you are brain dead, kicking turkey out of nato or not, how is that up to you . Do you have the authority to make such a decision . Manus on top of this, the u. S. Has proposed 2. 4 billion in tariffs on french goods in response to the tax. Macron said trump will meet today. Maria tadeo is in downing street for us. Macron has ruffled quite a few feathers in the runup to this meeting. What is his strategy . Maria thats right. Today should be, in principle, a happy day. Of one ofnniversary the longest Standing Military alliances, but there are so many points of friction and one is Emmanuel Macron who said nato is brain dead. He said there is no Strategic Vision and questioned one of the most fundamental basic principles of nato. There is the continuing spat with erdogan where the two men were trading insults. Macron who should get a medical check to see if he is brain dead. Macron never said turkey should be expelled from nato, but was critical of his incursion into syria. The problem for the europeans is the same. Turkeys key strategic location for the eu when it comes to the migration. We expect today when Emmanuel Macron and erdogan, johnson, and merkel meet on downing street, he will ask for more money on his syria policy, which is becoming more difficult for the europeans and expensive. Add to this the trade tensions, the u. S. Considering the idea of imposing more tariffs on friends france. Emmanuel macron has many issues today focus on. Nejra exactly. So that might be a discussion on the sidelines between President Trump and Emmanuel Macron. President trump has been critical of nato repeatedly, but hes now not the only one, so how are all those tensions going to play out this week . Hes always said the u. S. Should not be paying for what he describes as the rich countries. There is always the criticism of the 2 target that many countries that belong to nato do not comply. If you look at the tweets thenight from trump, language is more diplomatic than other rotations and he has now taken credit for the increase in spending from many nato countries. We understand today that the u. S. Is not going to focus so much on spending, but they are going to target china and they are going to talk about technology and 5g. This is something that creates tension between the europeans and the u. S. The u. S. Wants to push for the veto of chinese technology. The europeans do not want to go there, but this is something that for the u. S. Is critical, to make sure they tame china. You have to see this in the context of the trade war. Nejra maria tadeo at westminster, covering nato. Dont miss our interview ahead of the nato summit at 1 00 p. M. London time. Lets get the first word news with Annabelle Droulers in hong kong. Well, in washington, a gop report says investigation into President Trump failed to establish impeachment offenses. It paints a picture of unelected eurocrats disagreeing with the president. The democrats will release their findings this week ahead of the judiciary committees public hearing. The European Union is gearing up for the worlds most ambitious policy against Climate Change. To cutcks leaders are net Greenhouse Gas in missions to zero by 2050. The eu is also considering taxing imports from countries that fall short of environmental standards. In the u. K. , the labour party is ratcheting up its attack on big business. It is singling out five companies it says are some of the countrys worst employers. Havese amazon and uber exploited, ripped off, and dehumanized their workers. Criticism ate same outsourcing giant iss. In hong kong, carrie lam is pledging or release measures as ongoing unrest continues to hit the city partial economy. She didnt elaborate on what measures would entail, saying there would be they would be targeted. She declined to answer questions on whether she considered meeting for the protester demands. Global news 24 hours a day, onair and tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. This is bloomberg. Manus thank you very much for the roundup. Coming up on the show, staying resolute. Christine lagarde is determined to restore inflation under her tenure. More on the story. Nejra and when traveling to work, tune in to Bloomberg Radio live on your mobile device or dab digital in the london area. This is bloomberg. Nejra this is bloomberg daybreak europe. Im nejra cehic in london. Manus im manus cranny in dubai. Juliette saly is in singapore. Manus certainly the latest trade news weighing into Market Sentiment in asia. And wef once again ignored the positive movement coming to her yesterday, wiping that away today. 2 , the worstn day in two months for australian stocks. They had been trading. With a record. Hong kong, holding up ok because of carrie lam pledging fresh measures for the city after terrible retail sales yesterday. The nikkei, closing weaker. A pickup in yields on the 10 year following the global bond selloff. For the 10 auction year in japan since august 16. Rba left rateshe on hold at. 75 . We had a hawkish commentary coming through from the governor saying global risks have les sened and Interest Rate cuts are having impact. A 50 chance on the bloomberg we see another rate cut from the rba when they need february of next year. Youve also got the gdp number to look at tomorrow, and we are expecting a slight pickup in the Third Quarter to 1. 7 growth year on year. Manus Juliette Saly in singapore. Lets turn to the ecb. Christine lagarde says the central bank will be resolute in priceing eurozone stability in her tenure. She said it will be wideranging including Climate Change and inflation. Accommodative policy stance has been a key driver of domestic demand during the recovery, and that stance remains in place. In the ecbs Forward Guidance, Monetary Policy will continue to support the economy and respond to future risks in line with our price stability mandate, and we will obviously continuously monitor the side effects of our policies. Manus Christine Lagarde was speaking at the european parliaments Economics Committee in brussels. Elias haddad, senior strategy at cba europe is still with us. Had a debate at what Christine Lagarde will attempt to do and i am seeing more notes about rate cuts from the ecb next year, which almost is in contrast to the intimation we have had into the runup of her accession to the top. What do you make of the debate . Elias to see the ecb turn more inressively loosening Monetary Policy, we need to see a worsening in eurozone activity and right now, that is not happening. Industrialturing production, especially germany, is starting to turn around. This week, we are having the factory orders and Industrial Production data out of germany, and the yearoveryear contraction in both these numbers are expected to ease, so if we continue to have this rovement or this lessening as long as Manufacturing Activity does not worsen in the eurozone, the ecb will be quite comfortable in keeping Monetary Policy on hold for the time being. Their review they have a specific 2 inflation goal, is that going to lift Inflation Expectations in the eurozone or will it take more than that . Elias it will take more than thatelias . The ecb already has an unofficial target. This Monetary Policy review will be very interesting, and it could take a long time. We will probably not have the result for another year. The fed has started their own Monetary Policy review last november and are not expected to give the result until the first half of 2020. It will take time, but the immediate implications for the euro and eurozone Financial Markets are probably limited, but it is important because a lot of times, the last time they reviewed the ecb was 2003 and Monetary Policy has changed significantly with the use of unconventional easing. The ecb will review everything from the price target, will they continue to target Consumer Price index, and the tools they primary to get to their objective, which is price stability. That het is interesting says himself, ruling out integrates helicopter money absolutely not. Y will review possibly revisit the definition of price stability. One thing that did catch my eye, where the currency goes next. We are seeing volatility in the euro. Did spikes, albeit a tiny amount, but 17 . Lets look at the chart in the gdb library. Gtv library. The volatility index trending at its lows, but the spiking euro does that continuing to 2020 . What drives volatility in the euro . Elias it is certainly all about relative Monetary Policy. The big spark up in volatility here is this increase expectation for the fed to turn on the Monetary Policy tap following the poor manufacturing isn yesterday. Recession in the Manufacturing Sector in the u. S. Has deepened. The created a jolting volatility and the ongoing trade tensions, bech doesnt seem to concluding any time soon. We still dont know when or if and where the u. S. And china will sign this famous phase one trade deal. All of this uncertainty is causing a lift in currency market volatility. Nejra elias haddad, senior currency strategist at cba stays with us. We are seeing erdogan speaking