Im nejra cehic in london. Were checking a third day of declines for european equities. The the stoxx 600 down. 7 . The bloomberg dollar index on track for its first weekly loss in a month. The dollar weaker against yen. The b. O. J. Pushing for more stimulus. Well talk about that more throughout the show and the new Zealand Dollar best performer in this session on the announcement of a new central bank governor. Perhaps that might not hold up with some of the data were going to get next week but thats how were looking in todays session. Coming up today on surveillance, we talk surveillance and get a take on markets later on in the morning. First lets get the first word news. Greenbrussels, giving the light for brexit talks to move on to the next stage. They have complied with their conditions over a future trade deal. Diplomats warned the discussions will be more difficult than the First Six Months of talks. In japan, calling for more stimulus, prompted the b. O. J. To adjust its communications to flag risks of easing. The change of messaging could say why some investors misinterprets the comments on he exit. Japans companies are more confident than they have been in years. The Global Economic expansion underpinned exports. The sentiment among large manufacturers rose to the highest level since 2006. In the u. S. , President Trump said he is very sure senator marco rubio will vote for tax legislation next week. He has threatened to oppose it. Rubio said he intends to vote against the unless the refundable portion of the Child Tax Credit rises throwing a wrench into negotiation. Mexicos central bank raised its benchmark rate for the First Time Since june. Bank of mexico lifted costs 25 basis points. The vote was split 31 with one board member calling for a 50 u. S. Barring. He they voted to remove the obama prohib i guess. F. C. C. Handed he enforcement to other agencies. This is bloomberg. Nejra thanks so much. Central bankers are gingerly trying to take away the punch bowl without spoiling the party. The moves were so well telegraphed or tiny and the language to hedged that there was barely a ripple in financial markets. President mario draghi said stimulus is still needed to bump up prices. It has remained uted overall and has yet to show convincing signs of a sustained or upward trend. An ample degree of monetary stimulus therefore remains necessary to continue to build up and support headline inflation developments over the medium term. Nejra joining us now is the head of g 10 fx research at Credit Agricole. Welcome. So were talking about basically moving the punch bowl away. But so, so gingerly. They want to keep the party going. Is this building up risk for greater volatility down the line . A lot of the rally in the merblinging markets currency was predicated on global liquidity. I think we could see some of the unwinding of the euro funded trades that are still very much out there and the global divergeance trade that could be the hallmark of what is to come in 2018. The currencies could benefit quite a lot from the Central Banks, respective Central Banks moving ever closer to an accommodation. That makes us bullish on the euro, on the scandinavian currencies going into next year. Nejra interesting. The euro could rally to 130 by the end of 2018. Our own target is 123. We expect a gradual grind higher. If anything, it is the case as you mentioned to try and take away the punch bowl, they will be doing so ever so slowly. In august, they will take into account the potential disruptive impact that any hawkishness may have on the market. By the looks of it soft this year, they have been pretty successful. However the trend appreciation in the euro is firmly in place. Euro looks pretty undervalued still. From that point of view, while there is still some head way to be made on the euro, we think there will be a more moderate, bullish caulk. From the Central Banks perspective, they dont want disfluppings the markets. They dont want volatile fifment you have to have conviction. From that point, i guess what im trying to say, is trend of appreciation would be here. There could be some wild swings along the way. If anything, really being the currencies has proven to be a pretty resilient trade and calling an end to carry trade, the removal of accommodation or market liquidity may be a bold call to make at the moment. On the whole, you think there are some factors that will continue to drive the trading activity but in the case of those currencies, funding currencies like the euro, conviction will likely grow. Well see it appreciating further from here. Nejra you have conviction in euro and you talked about as well. What about e. M. Currencies . More cautious. They look relatively cheap to us. We have a fairly well defined geographical performance pattern across the globe. We like europe the most. That is the top performer in our outlook. Very positive outlook for the year. Distance, the underperformers, a view of the world will give you currencies. Nejra you read my mind. Were not necessarily bearish on the global outlook. What we see as a distinct risk, is that outlook going to become less homogeneous. It is the first time we have all four economies, the u. S. , eurozone, japan and China Growing in sync. It is mostly positive for the merging markets, however growing forward, there may be a slide for the chinese economy in particular and that may create some relative value trading opportunities. This is why were not bearish on risk. We do think that asian currencies may prove to be the underperformers Going Forward into nejra that is interesting. People keep talk about this synchronized growth. There is a question of sustainability for chinese growth. Nejra thank you. Our guest stays with us on surveillance. Up next, he will be there. President trump said he is sure budgetubio will back the bill. This is bloomberg. Nejra youre watching surveillance. Preparing for a complete overhaul of its top management. The c. E. O. Plans to step down. His term ends in 2019. The c. O. O. Is set to leave next ear. It would put him in line to take over the top job. Shares fell the most in nine years. The Swedish Company reported the bigs drop in sales in at least a ecade. They are raising questions about the companys expansion plans. Among companies that submitted preliminary bids for the Consumer Health business. According to people with nowledge of the matter, nestle in the first round. Spokesmen for merck declined to comment. They didnt immediately respond to requests for comments. Disney to buy chunk of fox will need approval. The acquisition would make disney the number one studio owner with more than 1 3 of the market and give it control over foxs fx cable channel. It puts the networks under the same roof as espn. We think this obviously will get a lot lot of scrutiny from regulatory authorities worldwide. It will take some time. We think it is very pro consumer. And steinhoffs International Chairman is stepping down from an advisory board. The board accepted the south african billionaires resignation from conflict of interest. An independent committee will take the acting role of chair. Nejra thanks so much. In the u. S. President trump said he is very sure senator marco rubio will vote to pass tax legislation next week despite threats to oppose it unless there are further enhancements to the Child Tax Credit. He said he plans to vote against the legislation as written unless the Child Tax Credit rises by 1,100 throwing a wrench into negotiations. Our guest is still with us. We keep asking ourselves how these tax cuts are going to feed into growth in the u. S. Or give a lift to the dollar next year. For you it is to do with an issue of dollar scarcity. Were less confident it is going to be a game changer for u. S. Growth or job creation. From that point of view, we maintain a cautious activity. We expect the fed to hike only twice next year. It could trigger quite a lot of inflows into the u. S. Dollar flows as corporations are repatriating earnings back home. He recent price action, the fx market, traveling on the back of the potential concerns about a ax reform and coexists with pretty solid evidence there is demand for dollars in the markets. It may be highlighting one important feature of those underpatriot earnings they are already in dollars. 80 of those earnings in dollars, the direction of f. R fx impact could be muted. Instead the key impact could be the dollar availability and the money markets really. Dollar liquidity currency one of the big issues surrounding the tax reform and the tax cut repat ration. Repatriation. Maybin deed the market preparing for a period of scarcer dollar liquidity. From an fx point of view, to what extent is it supportive for the dollar . Nejra how does that affect dollar dynamics . Looking into correlations between currency swaps, euro or the pound. There is not really a longterm evidence of any really. It is the case that the euro was suffering last year and the year before because the markets on the speculative side were bearish on the euro. The dollar funded trade like carry and risk correlated currencies may be unwound if indeed the pressure of currency becomes a bit of an issue for them. I dont think the pound or the euro will suffer a lot on the back of that, but just because you mentioned that during our previous discussions, the risk or the risk rally. Dollar currency may prove to be one. Nejra what becomes the bigger driver of the dollar fu you . The issue of dollar scarcity or what the fed is doing in relation to currencies . Our currencies in our g 10 world, the aussie end, the q. E. , those currencies could suffer if the dollar scarcity becomes more pronounced. The correlation with the u. S. Treasure i have interesting. There was a breakdown in the correlation between fx and rates across the board. It is safe to assume some of that correlation may reinstate itself Going Forward, we are confident to call for dollar upside on the back of a higher treasure yield. Most correlated with the treasure yield. The yen, the aussie, the new Zealand Dollar. The currencies expected to underperform the dollar. Nejra with the yield curve, janet yellen said dont fear the yield curve flattening. We have seen the bloomberg dollar index tracking it. Moving lower along with it. Is the yield curve going to steepen . It is a function of a couple of things. The shord end and the long end. We expect two more rate hikes from the fed and expect treasury yields to hit higher from here. Not really significant dynamic. Clients seem to think well be heading fla flatter from here. That has correlated with what has been happening with the dollar more broadly. It could be seen as one of the negatives for the dollar Going Forward. Nejra our guest stays with us on surveillance. Up next, dissent in japan. We talk Monetary Policy as a member of the b. O. J. Board calls for more stimulus. This is bloomberg. Nejra bloombergs surveillance. Thats what youre watching. Im nejra cehic in london. In japan, calling for more stimulus has prompted the b. O. J. To flag risks for additional easing. According to people familiar, the change of messaging could explain why some investors misinterprets the comment on the reversal rate theory and a hint bout an earlier policy exit. Meanwhile, japans companies are more confident than they have been in years. As the Global Economic expansion underpinned boosting profit. Sentiment among large manufacturers rose to the ighest level since 2006. Our guest from Credit Agricole is still with us. The focus today on the new development of possibly extra stimulus from the b. O. J. Generally it has gotten quiet on the yen front. The b. O. J. Is very happy that the yen is no longer front and center . The market. When that happens, it is usually for all the wrong reasons, risk aversion or unwinding from the carrier trade. It is one of our preferred funding currencies. The b. O. J. Has no intention of exiting its policy any time soon. Yield curve control, a policy that replaced the q. E. Policy earlier will continue and that should continue to make the yen a preferred short for many investors. That said, given that we are now in a global divergeance trade where next to the fed, we have the e. C. B. And the bank of canada and other Central Banks moving closer to the exit of monetary accommodation if, you want to sell yen, buying the dollar. It is one of the currencies we expect a significant upside. Revisiting its multiyear highs before long. It would be the best example of what they mean by policy divergeance. The fact being that the e. C. B. Is inching ever closer to the exit and that makes the euro less andless attractive funding currency where the yen is keeping its reputation. Nejra very briefly, sterlingyen. Also bullish. European currencies as a whole apart from the swiss frag look undervalued. The pound new york city exception. The pound is higher against the yen but also the dollar the abating brexit concerns will continue to attract inflow into the guild. The u. K. s stock market. The yen will likely maintain the funding currency with the excess really saving from japan really heading towards the u. K. As well. Nejra all right. The head of g 10 fx agricole. Thank you so much. Great to have you with us. Up next, theresa may awaits the green light from brussels. Will the next round of negotiations prove even more difficult . Well go live to brussels and talk about that in the next halfhour in our special brussels show. This is bloomberg. Is this a phone . Or a little internet machine . It makes you wonder shouldnt we get our phones and internet from the same company . Thats why Xfinity Mobile comes with your internet. You get up to 5 lines of talk and text at no extra cost. So all you pay for is data. See how much you can save. Choose by the gig or unlimited. Xfinity mobile. A new kind of network designed to save you money. Call, visit, or go to xfinitymobile. Com. Nejra now it is time for our weekly brexit show. Im nejra cehic. Lets get your roundup of this weeks brexit news. Heres Sebastian Salek. Sebastian we started the week with the brexit secretary saying he wants a trade deal that includes the best parts of the agreements with japan, canada, and south korea. David davis comments came as theresa may prepares to hold a Cabinet Meeting before addressing the house of commons to spell out the details of a brexit deal. What we want is a bespoke outcome. We may start with the best of canada, japan, and south korea, and add to that. Sebastian that was underlined by the e. U. s trade secretary. He said britain once a trade relationship with the e. U. That is virtually identical to the one it has now. Speaking in buenos aires, liam fox said keeping a similar arrangement will ensure a smooth transition. He dismissed Michel Barniers morning that this agreement is the best britain can hope for. By the middle of the week, the European Union was warning the u. K. Against going back on agreements made last friday. Michel barnier said the block was on alert against britain trying to undo the deal. Headed. Prime minister to a summit yesterday for what was set to be a celebration of the victory in brexit. Theresa may arrived hours after a serious defeat at the hands of her own party. Lawmakers voted to change her governments planned legislation so they will get a meaningful vote on the final deal to leave the e. U. In 2019. E leaders are expected to give the green light for brexit talks to move on to the next stage. Theresa may seems to have complied with their conditions to starting negotiations. Diplomats have warned that these discussions will be even more difficult than the First Six Months of talks. Global news 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries. Im Sebastian Salek and this is bloomberg. Nejra thanks so much. Ofles demeures is the arm daniel feel. The company has seen a sharp increase in buyers as french expats returned to their home country. Mariehelene lundgreen is the director of belles demeures and she joins me from paris. Delighted to have you on the program. As some momentum been continuing for the luxury market in paris as a result of brexit . Mariehelene yes, nice to be with you today. Ofsee from the brexit a lot french nonresidents that were in u. K. Coming back to france. It has actually doubled in one year since 2016, the start of 2016, and 2017, it is even more doubled. Nejra and what segments in particular have you seen more demand for . Are we talking apartments in paris . Are we talking more luxury mansions . Which segments . Mariehelene there are all segments. We have of course lots of young couples that went into finance and established in the u. K. In london that are coming back, looking for family apartments. Townhouses, small private mansions, townhouses, did a over recently 5 Million Euros deal. Just to give you a few numbers, is a bitr agencies like south kensington, where lots of french expats live in london, and the increased the number of sales 80 . Brexit,s not only the the people working in the finance sector. It is also what is happening in england with the restrictions in the nondone regime, and some tax reform, and we have a lot of european, middle east, israel nejra actually, yes, i wanted to ask about that. You talked about french expats moving back to france. As a result of brexit, have you been seeing more demand from other europeans, perhaps anticipating that the city of london might not be so important, for even british people perhaps . Mariehelene we have seen that already several Major Companies have started to relocate. They have made their contingency plans to see what is going to happen. They cant wait for the last moment. Then, as i told you, because of the new tax regulations in buyers, quite a lot of from europe and from other parts of the world, they want to buy in paris. Paris is very close t