♪ .> good morning days topese are the stories. >> stocks gain. engagesresident trump kim jong-un and a game of nuclear one upmanship. mifid.of the what investors sit on their investors sit on their hands? ♪

anna: good morning, everyone. we need to talk about what has been going on in the markets overnight. we have pulled upbeat msci 0.*%.acific, up by about the nasdaq going over 7000 for the first time. really we start with the same questions as we ended last year around synchronized global growth and corporate profit. to a extent can that outweigh concerns? we will talk more about the inflation conversation as we go forward. the inflation conversation is very relevant with the dollar. the dollar had a bad year. inwas down by 0.5% yesterday's session.

another asset classes picking up in 2018 where it left off in 2018. legislation mifid coming through. we could see low volumes and stocks and bonds. we'll talk more about that as a goat to the program. london,t is wendy in but it is cold in the u.s. boston is still sub 20 degrees. it is freezing, cold. america's gas market faces a litmus test. this takes us through some of the records that we set in 2014. the polar vortex smothered the eastern seaboard. it means that it is very cold, with a lot of snow. americans consumed 143 alien

cubic feet of gas. the commodity index is rising. you mentioned the oil market and the drop in the dollar. there is this storm and you have this normal dollar that is driving the bloomberg commodity index, up for 13 straight days. we hit the highest level in a month. stockpiles are dropping. the five-year averages down. donald trump will possibly make et out of this, because the u.s. is exporting more gas than ever. those are your markets. energy is going to be front and center of our debate. let's get your first word news. juliette saly is in singapore. >> the deadly protests in ironic

have intensified talks and the trump administration about imposing fresh sanctions against the islamic republic. his pence and members of national security team will discuss protests amid deliberations that are already underway about three imposing sanctions or adding new ones. bravery forgreat to use the people power of their voice against their government, especially when their government has a long herstory -- history of murdering its own to use the power of their voice against their people. the parts of the u.s. seeing record low temperatures may now see a snow bomb. boston may see as many as 11 inches, brooklyn and queens

could get four inches. the united kingdom is battling a with some think went up to 80 miles per hour. ,2 billion in compliance costs two years of preparation, and one false start, the biggest regulation of the financial industry in a decade is finally here. trading volumes slumped ahead of mifid ii coming into today. u.s. senator of utah says he will not seek a term in 2018. he is the longest-serving u.s. senator. the decision may open the way to a senate bid by mitt romney. romney is viewed as a republican elder statesmen who could challenge donald trump, who he

has called a fraud. global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. you can find more stories on the bloomberg at top . the equity rally momentum continues here in asia. the msci asia-pacific index holding and building onto those record highs. japan it is still out of the picture. we are seeing some strong gains to me through in the hong kong and china markets. still some momentum coming through in the korean market. it is really these apple supplies, the tech story dozing on the rally today. you can see tencent and hong kong is one of the best performers. the best performer when you look at index points on the mrr function. we see continued momentum of china's economy holding fairly

strong. conductor company in china. 1997 highs after hitting the daily limit of a 10% gain. >> thank you very much. donald trump has responded to kim jong-un's latest threats, saying that the u.s. has a much bigger and more powerful nuclear button. manus: the protests in iran have intensified. talks have intensified about imposing sanctions against the islamic republic. >> officials raised rates for the third time last year. the market had to deal with this as a come into 2018. manus: there is all talk and there a few answers from the fomc. let's try to make sense of the politics and the markets.

welcome, happy new year. here we go. it is one of janet yellen's final swan songs, in terms of information that we get from her. it is about why we have justified three rate hikes. the market wants reassurance. >> i think that is right. i think the real question for the markets is around inflation. the marketsround this year, the three focuses will be liquidity, inflation, and the macroeconomic earnings momentum. if we take the inflation outlook, the question is, how can they justify three rate hikes this year at a time when inflation is consistently undershot? this is not just a problem for the fed. it is a problem for the other major central banks. of course in the, we are very unlucky -- in bit u.k., we are

very unlucky. this is where we are. that i think is the conundrum. share some like to inflation. that is not possible. crossing the line, bond markets starting to price in inflation. this is u.s. 10 year breakeven rate. towards the end of left a, it started to shift a little bit in the bond market. whether that was to do with tax or something else, is that going to influence? clearly the fed watches that. >> i think it does. it is a little bit of the market chasing its tail. you go around in a circle. i think we have to abstract back from that. to lookly what we need

at if we are looking at inflation and the longer-term growthes and weekly wage in the u.s. it has been quietly creeping higher. it is definitely going higher. i think that is the key. people focus too much on the average hourly earnings, which is very volatile. the weekly earnings are less volatile. that is where the inflation will come from this year. manus: if that is where the inflation comes from this year, we talked about a global story. you have china giving their manufacture numbers yesterday. take a look at this. this is the global growth and global inflation outlook. where has inflation gone? inpeak inflation mentioned november. manus: they talked about it but it never really arrived.

is 2018 the year that you take this chart and at the same time begin to consider that inflation reasserts itself globally? >> i think it becomes more of an issue. we have been able to ignore inflation for the last 10 years. becomes a light subject for the first time. we are overdue a recession already. manus: if we extend the growth in 2018, that is the second --gest growth and 1960 -1969. since 1960 >> there is a point at which inflation does make itself up. we've talked about wages.

maybe we should also talk about commodity prices. oil has been creeping higher. >> we will not front run our conversation in the next part. let's pick up on what you said there. inflation might be something that the market focuses on. where does that leave equities? where does that leave your strategy? failing tontiment match bonds and equities. of investorasure confidence. not a," how do you feel? " confidence. >> i think people are increasingly nervous, particularly when it comes to the u.s. i cannot remember the last time somebody measured the u.s.

equity market without mentioning ghight valuation -- hi valuation. we are at high violation. rock, they at black say we are going to end the year , profits are going to rise, economic growth is going to hit 4%. he called the markets fairly well last year. what do you think? i think for the markets it might be quite cathartic to have a drawdown. >> i think so. i think it would be good for the market to remind investors that there is some downside. i do not see why at the turn of the year, the strong momentum should suddenly magically stop. there is no reason for that. we know that the first quarter is traditionally very strong for equities.

european equities always have their best quarter in the first quarter. economic momentum is fantastic. earnings momentum i think we'll pick up any europe, just as it has done already in the u.s. and japan. what is the story? i think the story here is that we continue to see upside at the moment, particularly at a time when maybe bonds do not look great. people are thinking, if i am to allocation,t of what do we do? i think there will be the temptation to move more into equities. >> we not fall into that trap, seamlessly transitioning from 2017 into 2018. manus: if you are traveling to work, tune in to the radio.

we are live on the air on digital radio. net is a conversation on iran with our reporter on the grounds. coming up on the show, commodities record run. the bloomberg commodity index is at its highest level since february. it' endure?re -- can we will discuss next. >> this is bloomberg. ♪

♪

♪ london.ive shot of it is 6:18. that is the millennium bridge. you are seeing sterling completely unfazed. nowhere near the days of

one 40's, one 50's. sterling is reasserting itself. ii.: mifid it comes into effect today. we could see low volumes and other exchange assets. manus: french president holds a cabinet meeting and then hold his news conference. i presume that he will focus on the franco german alliance. anna: we have heard about that franco german alliance since the start of the new year. the fed meeting is at 70 car p.m. -- 7:00 p.m.. juilette: bitcoin has bounced back from its new your decline -- new year decline.

the san francisco-based firm has been purchasing small amounts of years. in recent the holdings are announced to be worth several hundred million dollars. euros moved 15.9 billion in 2016, saving the company billions of dollars in taxes. structures to showed the majority of its shield the majority of its profits. hasaba's financial declined a money grab. chinese takeovers of american companies have prompted warnings

from lawmakers about risks to national security. mayeth griffin's hedge fund expand as it closes in on a deal. according to a person with knowledge of the matter, citadel has been in talks to higher e severaleople -- hir people. that is your bloomberg business flash. anna: thank you. bloomberg commodity index is at its highest level since february. freezing temperatures in the united states have seen natural gas prices jump. some agricultural products have push the index higher. manus: we are looking at this chart.

these were record long positions. we have the global head of strategy at bnp paribas. you would say some of that is fine? it is the commercial operators that you think are beginning to heels of a this rally. of course. who is the other side of the trade? the other side of the trade are oil companies themselves, particularly the shale companies. they have been taking advantage of the higher prices to lock in the higher prices by selling futures at those levels. that tells me something.

they are saying that we are not confident that these prices will remain, so we will lock in our business model here at this level now so we can fund our investments, and not have a cash flow problem. we've got a lot of very cold weather at the moment. there have been some temporary shortages. so it is these is these sort of things that maybe we have had a lot of good -- for oil. everything good comes to an end. i wonder if we have hit the peak of this particular many cycle. anna: we have seen other commodities rallied as well. -- the shaley, story driven by opec

and shale. what is it that is driving the commodities? >> i think in the short term, we have extraordinarily strong and coordinated global growth. when you think of domestic metals, clearly the backdrop to the higher demand is that growth. we are exceeding expectations. we expect to produce more of the chart next, more cars, and therefore we need more of these industrial metals. we have really just come out of beare what is a six-year market for commodities. >> so this is catch up? >> i think this is the beginning for catch-up. you could argue that commodities could still go a lot further to the upside from here. manus: anna mentioned china.

atbrings to mind the speech the 19th congress, where he talked about pollution. palladium has seen the biggest drawdown in years. squeeze, in real terms of there are other stories at play, in terms of the pollution story, driver less cars. this is going to try things like palladium shortages and keep in key markets. it thator less intimate they are going to skip a generation. >> the bigger story might not be china, but india. people do not drive cars at the moment. it will be like mobile phones. who needs a landline?

you just go straight to mobile. maybe for them it is the same story, but with a electric vehicles. they can go straight to electric vehicles. then they do not have the cost of gas stations. they can go for the electric charge right away. inflation is city surprise index. we talked about things that could be driving inflation a little bit higher, i suppose, and 2018 -- in 2018. it continues to surprise on the downside. >> i think you need to be careful when you look at this chart. any surprise index like this is by nature reverting. it comess down a lot, the to zero indians -- in end. manus: the global head of equity

derivatives strategy at bnp paribas stays with us. anna: mifid ii goes into effect. how will the industry cope? this is bloomberg. ♪

manus: in tokyo, the emperor's palace. it is 3:30 in the afternoon. let's see what the fed has to say later this evening. is nejra cehic. nejra: you talked about debt as a duck. asia index alive and kicking. asian equities gaining to a fresh record. china higher, hong kong higher, australia higher. japanese markets closed.

the dollar, five days of weakness. what we are seeing in the dollar it is finding some support. it looks like it is seeking a short-term low, snapping five days of decline. the dollar gaining. we sell the 10 year treasury yield rise. trading inseeing treasuries in japan because those markets are closed. this is the 10 year breakeven rate. it has gone above the fed's target for the first time since march. pmi's, showing some supply thetraints, perhaps meaning prices may have to rise. finally, taking a look at the gold. gold has had a nine date rally.

it is snapping that today. seeing the relative strength index above 17, the highest level since september. the last time it was at this decline for gold four straight weeks. it is holding above $1300 an ounce. anna: nejra cehic with the latest on the markets. we go to mifid now. the biggest shakeup of european regulation in a decade is finally here, mifid ii takes effect today. asset managers spent years preparing. are they ready? joining us is a senior policy analyst. well.with us as tell us about what is going on behind the scenes.

how will the rules be enforced from today? >> mifid ii is one of the largest pieces of regulation passed. it has taken seven years to get this far. in my view, i don't think many companies, perhaps the larger companies in europe are likely to be 100% mifid ii compliant today. nine of the 28 eu countries have not yet integrated mifid ii into their own local law. today, you cannot legally apply to those countries. yesterday, polish authorities takemifid ii will not effect in poland today, because they have to finalize local measures. manus: we had a chat about this yesterday, which is companies that say they are doing their best, they are going to be given

d of time to get their house in order. is this a turning point for markets? this is about over-the-counter market. better transparency for everybody in markets. they were quite easy to manipulate, were they? intofid ii does come effect after a long time in the making. a journey, not an event. it will take companies more time to become compliant. regulators here in the u k has said they will not take enforcement action immediately against companies that are not fully compliant. theyng as they can show had tried. if it is clear they have made no effort to comply with the rule, then there will be enforcement action.

if we are talking about penalties, we're talking about 5 million euros. there are a lot of rules to read. i've seen the charts comparing the size to other legislation. from a market perspective, not directly talking about what is happening in the near term with mifid ii. does this change investor behavior? investor appetites for certain products over other products? what is relevant for you? boosts theo think it market for listed product. for us, i think that is one clear move. within that, there will be a continued push. is on a consistent growth path anyway. mifid will be another following

wind for etf's because they are easy to track. there are very little complications. forget, wallnot street increased transparency for clients and brings down prices. i have my doubts if it will achieve those names. i would argue etf's will be the beneficiaries of mifid ii going forward in europe. edmund, thank you, global head, bnp paribas. in the interest of full disclosure bloomberg lp competes to provide a range of services for those compliant with mifid ii rules. within 10 months the british

government -- moving on to another subject -- they are aiming to have an agreement on their divorce bill. at least the outline of trading relationship post-brexit. there is a piece out on bloomberg today looking at several scenarios that might come about in 2018, including upsets and walkouts. it is a fascinating piece. it shows you the base case. , global head, bnp this,s, when you look at and some of the outlines in are other things that could happen politically in the u.k. that make it more complicated. edmund, what are your thoughts on that? edmund: i think we have a developing value story. if we look at equities, gilts

are a little more complicated, but even there you would expect inflation rate in the u.k. to slow down. generated by was the currency. the currency has calmed down. the inflation push coming from imported inflation should calm down over the next few months. that may provide some support for gilts. it is not really educate index anyway. is it breaking out to new time highs? if i am looking at that, i am thinking i want to buy some value there. the first quarter is the strongest quarter for value investing generally, particularly europe. if you want to invest in value, the first quarter is the best time. the u.k. represents a value sector right now. those searching for income might want to look at the larger u.k. companies right now.

manus: part of the underperformance is in the ftse. year,lue of sterling last to a certain extent, that export story from the u.k. was one of , do you say with you would be an interested buyer at the start of the year? so.nd: yes, i think you have to pick and choose your sectors. in a europewide context, the they sell might have, into, for instance airbus, and airbus will suffer because of the euro against the dollar. , ise what you want to do look at income stocks, more boring stocks, utilities, banks.

another interesting story is what we call the bounceback portfolio. those stocks that perform the worse over 2017 generally enjoy a better market performance over the first quarter of the next year. if you think about companies are dixons carphone, these companies that performed awfully last year. past performance suggest they could have a good first quarter. you may find the best value in beaten down stocks. anna: there are a lot of people reevaluating their portfolio. i've got this function for you. brexit uncertainty not withstanding, what continues to support the pound? portfolioe bloomberg function. fofp.

it shows the u.k. is a top destination for funds as the end of last year. of december 30 1, 2017, this is looking at the stock. aside some of the brexit , does this show there is merit to arguments of underlying appeal for sterling? what could be driving this? edmund: if we look at this chart, and the u.k., let's not forget the equity story. there are big companies that , that are easy for investors to access these. that is one of the key appeals at a time when they are offering high dividend yields. anna: that helps u.k. stocks punch above their weight? exactly. for those seeking income, there

are fewer alternatives, and u.k. stocks are one of those options. anna: the other -- manus: the other thing we looked at, the iranian story, and foreign investment in the u.k.. this is foreign direct investment in the u.k.. it tells an interesting story. pound,e a drop in the and that ties back with what anna talked about, the flow of money. our base case scenario with brexit in the first quarter, to sustain that level -- i was surprised to see that kind of good in fdi --this is a point if one can lay the foundations for a good brexit, it is maintaining this fdi. edmund: i think that is right. fall in sterling have made

british assets artificially cheap. foreign companies look at that, and leading brexit aside, they are often globally exposed assets. why should we not get involved? you are absolutely right, manus, to continue this level of foreign direct investment you need visibility. that is for sure. that is what we need. anna: edmund, thank you. edmund shing, global head, bnp paribas stays with us. there is a delegation taking place in china. manus: let's see if there is fanfare. some scathing comments in regards to the u.k. leading the biggest union. reminder, if you are bloomberg customer, and you have tv ,

you can get all the functions that flow throughout the program. you get to ask edmund shing a question. mentioned, we will talk about deadly protests in iran. u.s. presidency is seizing on the crisis. meanwhile, the death toll has risen to around 20, with hundreds more detained. tehran.oined now from give us the latest and what has been happening overnight. we seem to have a difficulty in indicating. we will try to establish i clearer line -- we will try to clearer line.

this started late last thursday in terms of protests against both the economic situation and the wider context. terhran. give us the latest from overnight. seems that the protests -- there was a security presence downtown. there is a video on social media it shared. there have been more arrests. arrests are hovering between 800

and a thousand people arrested. the unrest may be tapering off. what kind of impact will this have on the iranian administration? apart from the arrests and violence, what impact is this having? >> it is going to be, it has been a challenge for rouhani. him andations against his economic record. there are also several reports sayings own officials they are organized by his hardline political opponents. what lookseal with like antigovernment protests. in some manifestations may have been politicized.

they are closely allied to .igher religious positions he has a huge challenge on his hands right now. obviously, heme, has to deal with pressure from the united states. mr. trump is weighing new sanctions. yesterday, when we spoke to you, you intimated there was a push twitterinst trump's comments. what has been the reaction? been far, there has not huge reaction from officials. what i have seen, it is more of a push back. i don't think this is anything

the iranian people or government were not expecting. since october with his speech, after he chose not to approve the nuclear deal. they believe the white house is the course to pick apart nuclear deal in some way. anna: thank you very much. motevalli on the ground there. claims he has a bigger button then north korea. this debate is raging on twitter. this is bloomberg.

♪

♪ anna: this is "bloomberg daybreak: europe." it is 6:51 in london. this is the live shot of new york. manus: back to basics today, back-to-school. let's talk about the euro. three-year high. comments, unless inflation, there is a reasonable chance qe -- edmund shing, global head, bnp paribas. the euro is powering ahead.

the market has begun to reprice. that has been pulled forward to the beginning of 2019. overly ambitious for traders? edmund: it may be a little and inches. where we are talking about inflation, it is picking up in the euro zone as well, but we have a long way to go from where the ecb would like it to be. we have a large gap in europe despite the economy we have seen for a while. i do not see the ecb necessarily has to move as soon as the beginning of 2019. anna: where does that leave the euro? the dollar had not a good year. the euro was more favorable. we're talking about the catch up story on european growth.

once again pushing toward the three-year highs. where does the euro set for you for this year? edmund: i don't see why 120 should be a limit. my colleagues it going higher than it is today. it is actually less than 5% higher than here. when you look at it from that perspective, and an economic perspective, it is not the level so much as the speed of aggression that is important. as long as it is slow and relatively smooth, there is no reason it should upset the apple cart. christmas is over, my son. let's talk about volatility. perennially low volatility, the big strategy was right the course, bank the premium. possibly say that is

coming to an end. edmund: i think that is right. maybe not straightaway at the beginning of the year. but during the year we would argue the inflation pick up will be reflected in the bond market. you look at the credit market and investment grade spread and high-yield spread, there are volatility starting to return. that could be reflected in equity markets at some point during the year. since january, 2017 we will be talking about political risk in the eurozone. we have not mentioned that yet. has that seemed to upset the apple cart? no.nd: since we have had loads of european elections and no volatility spiked for anything

more than a day, a few hours even. i would say no. to focus.ot the place inflation is the place to focus. wages is the place to focus. once that hits the bond market, you will see records and volatility market in other assets as well. is one of those sectors that has underperformed dramatically in twice 17 in europe. in the u.s. it has performed well in contrast. looking forward, i think there is a good chance for catch up, europe versus u.s., which means the european sector could emerge very well. anna: edmund, thank you very much. edmund: --edmund shing global head, bnp paribas, joining us with his thoughts. coming up, we are joined by david bloom. we will talk about the united states where he sees the inflation debate going. we will get more views on that.

a lot of geopolitical tensions to talk about. president trump active on that front on twitter. we'll get updates on that. this is bloomberg. ♪

♪ manus: good morning from bloomberg's new european headquarters in london. i am manus cranny. edwards.m anna manus: new year pushes equities to new highs. anna: oil trades narrative to year high. the u.s. braces for winter storms. europe'sy of mifid, regulatory shakeup comes to force. will investors sit on their hands. warm welcome to "bloomberg

daybreak: europe." it is 7:00 in london. u.k. retailer has determined its numbers. total brand sales up 1.5%. the estimate was for it to fall by a half percent. we have seen a tortured october. november and december were expected to show improvement, but nothing like this. 45 pounds isis, where we trade at the close of business last night. you are seeing total brand sales up by 1.5%. fourth quarter retail sales rise. the estimate was a decline by 8%.

you are seeing a good set of numbers come through from next. the state of play on european markets, paris, france are open starting to trade. global synchronized growth story taking center stage. asian stocks build on their records. records and the united states. msci asia-pacific. china index up over 3%. the dax is trading nicely. nicely. some strength there. talking about china cutting oil exports. tribalism and anarchy will spread around the world. anna, you have the risk radar. risk comee will the

from? from the united states. msci asia-pacific up. 2017, the nasdaq up. the s&p closing at an all-time high as well. asia following on the u.s. lead. we start with the same questions we ended with last year. corporate profits, to what -- and aboutose geopolitics. the dollar index is flat right now. around the flat line all this morning so far. it was down yesterday by a half percent. picking uper asset where it left off in 2017. twice 17 not a good year for the u.s. dollar.

moves this morning, steady around $60 mark for crude oil. around the weather, around the snow in the northeast of the united states. quick correct from me. we have a little correct. next isline i give you correct. my talk about fourth quarter byail, sales change declined 6.1%. i said they rose by 6.1%. the estimate was for a decline in terms of retail sales. that comes down by 6.1%. you are seeing an unexpected rise in the fourth quarter. let's talk about the bond

markets. are some big calls out there this morning. the bolt call of 2017 in the bond market. bundedian forecast for the title -- bullbold title. the money markets are pulling together their view on when you will get your first rate hike. the bond markets in the united states, we got the fed minutes tonight. we will talk to our guests david bloom on what he expects. you are looking at near-term t-bills spiking. bonds maturing on march 29. ceiling and inflation are

the two themes for your bond markets for 2018. biscuits your first word with juliette saly standing by. juliette: the deadly protests and iran have intensified talks in the trump administration, considering fresh sanctions against the islamic republic. according to two white house officials, vice president mike pence and members of his about re-imposing sanctions or adding new ones. america has note unilateral plans, but once an emergency session of the security council. >> it takes great bravery for the iranian people to use the power of their voice against their government, especially when their government has a long history of a murdering its own people who dare to speak that truth. have to united states already seeing record low

temperatures might get hit with a snow bomb. boston may see as much as 11 inches. manhattan could get three. united kingdom has been battered winds upeleanor with to 80 miles per hour and the risk of flooding. in europe after seven years of preparation, two dollars billion -- $2 billion. according to two brokers with knowledge of the matter, trading slumped ahead of mifid ii coming into effect today are paid yard -- into effect today. u.s. senator senator orrin hatch of utah said he will not seek another term in 2018. he is the longest serving senator in u.s. history, and a leader to rewrite the tax code. the position may open a senate bid by mitt romney.

republicaniewed as a statesman who could challenge donald trump, whom he has called a fraud. global news 24 hours a day, powered by 2700 journalists and analysts in more than 120 countries. you can find more stories on the bloomberg at top . the msci asia-pacific index holding on to record highs. worth remembering that japan remains out of action. the hang seng is faltering in late trade, not up as much as in the earlier session, but still great gains coming through. also south korea had a good day today. in techhowing the rally stocks similar to what we saw in the u.s.. costco looking good, -- posco

looking good. this is a malaysian government holding company up by 10%. a lot of these malaysian government companies rising on reports that there could be an election. , thank you very much. donald trump has responded to the north korean leader kim , theun's threat saying u.s. has a bigger and more powerful nuclear button. have protests in iran -- thefied talks about markets have to deal with the geopolitics. manus: away from the geopolitics when they raise rates for the third time since last year. david bloom joins us.

a lot of tension surrounds north korea. there is a twitter battle between donald trump and kim jong-un about who has the largest nuclear button. with have another year geopolitical tensions? david: i think an fx market we have. reportinge chinese the gdp stronger. the dollar has made a bit of again. i don't believe we are in a political world. we are in a cyclical world. direction oft the korea, it doesn't look to have a lot of politics and it. manus: if it is going to be what central banks do, then it will have a impact on the bond markets i presume, will the dollar return to responding to bond yields?

does that relationship return? david: it is predetermined. when payrolls are coming up on friday, you get this number, coming out, big deal. they told us follow the dots. being predetermined means of volatility is very low. the data does not matter as much. but what central banks actually do does matter. it is not just about the fed now. it is about what to the aussie's do, the scandinavian central banks? we've seen the ecb move in, and the bank of england, and the bank of canada. who is next? anna: you are following the central bank story.

andd: the markets had one, the fed had three, and the dollar went down. what relationship is there there? is it the global growth story that does really well? when you see global growth doing well, does the dollar go down rather than up? these of the questions we are grappling with, rather than what is happening on twitter. --us: can i ask david: you can ask but it does not mean i will answer. [laughter] manus: behave.

there is going to be a coordinated move higher, it is that too strong? david: nothing is too strong. the dollar went up massively in 2014. then we had the ecb last year. who is next? sweden, norway? manus: could japan be bounced 0% targeting? that could have a bigger bang in the market. david: they tried that before. the economy got slapped. rates and the economy crumbled. i do not think they will be quick to do that. after 20 years, they are saying there is a negative impact. , don't think the bank of japan it is like,t story,

let's talk about it, and it never happens. back on the inflation and fed story, we get the minutes later today. inflation is the hot topic of debate. you look at the amount they talked about it. they talked about it increasingly in their minutes. how do you way out the inflation outte -- how do you weigh the inflation debate? seems unfortunately, it they have the mandate in the u.s. , you are right to focus on inflation. what is more important? the numbers or how many people have jobs? they are both equally important. the big puzzle is why do unemployment rates keep falling,

and average earnings do not rise? what is happening with the natural rates of unemployment? it doesn't exist. we have been looking for it in the u k. it just kept crumbling. the inflation debate is important, but the fed is more predetermined then data determined and volatility remains low. manus: we had a drop in the dollar last year. everything that you just said, what happens next for the dollar? -- dollar third q4, q1 through q4 -- david: it is a pick and choose. inre is no bull market like

2014. there is no bear market. some currencies will do well, some will not. this is a forecast in direct opposition to a consensus. we think it drips lower. there is no smash bang wallop. weaknessling we have coming around this year. the euro is drifting. david bloom stays with us. he is the global head of currency strategy, hsbc. thank you, david bloom stays with us on the program. manus: david mentioned some of the other concert -- david mentioned some of the other currencies.

we will bring you our conversation with the uk's trade secretary, liam fox. this is bloomberg. ♪

♪ berlin, where it is 8:20 a.m. 0.5%.ng up by it is mifid day. let's talk about these markets. 40 minutes away from the start of trading day. yield.hanged german bund

let's talk commodities and the currency dimension. it is near its highest levels since february, rising for 13 straight days. temperatures in the u.s. has seen natural gas prices rising. the globald bloom is head of currency strategy, hsbc. commodity markets are on the run. how do i want to play these currencies? about theyou talk triangle which is commodity that is brilliant for emerging markets. stability.

commodities are doing quite well. this is a great environment for markets. is that one of your calls? thed: if you want to go for commodity play, that is the ruble. we like that. we like india. in turkey. what is the structural change? david: if you look at the current account, you are not starting off something you have massive deficits. a bigger current

account two or three years down, and then you start worrying. for the moment you don't have to worry. current account deficits are a big worry. the flow of funds -- anna: fofp. manus: this is the flow of money into stocks in the u.k., and that overall flow of money. this is part of this support system behind sterling. continuing?hat flow this is american money into the u.k.. david: if you've got a big deficit, buying financial assets and the u.k.. flows has totfolio

come into your country, or if you've got a current account deficit. anna: is that a concern for u.k. assets? david: you starting off with the current account deficit, they can change the number they tell us. u.k., starting with the big fiscal deficit, and big medical problems, why would i want to currency? manus: i'm surprised it is not lower. if you picked everything you said, wise and not trading at 120? david: time. manus: you can't buy time on this show. sterling, you can sell at 135. isn't that beautiful?

fair value should be 155 of this currency. i was going to ask you what the catalyst could be, but it sounds like it could be many. david: there are lots. we are at the heart of optimism regarding brexit. from here things could go very difficult. deficit, political problems, and cyclically, one of -- most under puffing underperforming economies. what do you like about it? what are your terms, big shot? declare long to sterling. manus: i don't have any training position whatsoever. what i find interesting is you just said we are at the optimism . is that what people are saying on trading floors? saw when negotiations

got closer, things we should have negotiated a year ago that negotiated recently. that pushed sterling higher. manus: we've done a lovely piece this morning, the base case and aria, and the walkouts mario in terms of the brexit scenarios. scenario?ur base case there is notg going to be a smooth trajectory. before we get their people will get worried. the last negotiation look like it wasn't going to happen. i think there will be a lot of tension. anna: thank you very much for joining us. i feel more awake than an hour and a half ago. david bloom, global head of currency strategy, hsbc. we continue these conversations

on bloomberg radio. manus: the european market open is up next with guy johnson. ♪

♪ guy: good morning. welcome. you're watching bloomberg. this is the "european open." all the things you need to know. ♪ method to lift off. europe's landmark financial regulation comes into effect today. more than $2 billion has been spent to prepare but are the markets ready? a war of words. trump lashes out at north korea saying he has a much bigger and more powerful nuclear button.