- Yuan drama devaluation disappears
- China does not seek a currency war
- investors seeking US rate hike indices
- BoJ focus after disappointing GDP
now that the initial drama of the devaluation of the yuan has declined somewhat, it's back in the US economic indicators to decipher directional clues market. Make it a bit more complicated is the lack of participation in the market was caused by the summer holidays.
The remaining market contributors seem content to turn their attention to Greece and the increase in interest rates from the Federal Reserve. A stable yuan over the weekend helped Asian markets recover some equity losses in recent weeks, market, while weak growth in Japan (Q2 GDP -1.6% annualized) stimulated hope a revival of the Bank of Japan (BoJ), lifting shares there.
For the second consecutive day, the People's Bank of China (PBoC) set its rates slightly firmer than the day before yuan (¥ 6.3969) and very close (less than 1% away) at the closing rate of the previous session. Investors take this as a signal that Chinese policymakers are willing to give up more control to market forces. This movement also appears to have eased some of the concerns of the markets that the currency of China's devaluation would hurt other regional exporters.
China Not Fond of war Mint
chief economist of the PBoC, Ma Jun, again reminded that the depreciation of the exchange rate is completed, and he anticipates a period of volatility in both directions with "the chances of appreciation and depreciation." Chinese authorities also announced that they are unwilling to participate in a currency war and pledged to meet their 2015 target 7% GDP, despite the IMF have expressed concern at the weekend.
FOMC in Focus
Now that the initial shock of the devaluation of the yuan is calmed (last week intraday price fell as much as 4% compared to the USD), some investors are willing to turn their attention to the issue of timing of the first increase in US rates in over a decade. A stable yuan will encourage U.S. rate bulls to believe that the Fed can not be deterred from hiking rates next month.
Wednesday, the Fed releases minutes of its July meeting and the market will be looking for any clues about when rates begin to be normalized. If US policymakers do happen to lean on the hawkish side within minutes, the USD would likely extend its rally against the emerging market currencies linked to commodities.
Despite midsummer keeping markets various price movements relatively tepid assets and beach of USD linked at the end of this week investors will have a preliminary understanding of the manufacturing of this month PMI for China, Japan, the eurozone and the US While in the UK, the inflation data will be closely monitored, given that the Bank of England (BoE) is expected to increase its rates Director of interest Q1 2016.
Stateside, investors will be looking for US housing starts in July on Tuesday and CPI data on Wednesday to add weight to their hike up rates argument. The argument of the data dependence USD majors saw little price volatility at the beginning of the new week.
USD / JPY has confirmed ¥ 124.52 after disappointing GDP release overnight, while one unit of the euro fell slightly for the second consecutive day to trade below psychological 1.1100 handle € .
For sensitive commodity currencies (AUD, CAD and NZD), investors should pay later tonight in the minutes of the RBA-meeting policy and New Zealand's Fonterra auction dairy tomorrow to get a better understanding of their currency moves respected.
is that the increase of the BoJ in October?
So far it seems that investors are willing to ignore disappointing Japanese GDP print overnight, which contracted in Q2 (-1.6% against -1.9% e) after two quarters of expansion. While the crisis was slightly below consensus, the key components of GDP private consumption and corporate CAPEX (capital expenditures) should be considered as particularly troubling to -0.8% against -0.4% respectively and e -0.1% compared to 0.0% e.
Digging deeper, Japanese exports have been significantly lower, falling to -4% after rising nearly 2% in the 2nd quarter. Economy Minister Amari of Japan attributed the slower spending at the wrong time, slowdown in external demand, and higher taxes on mini-vehicles. However, he expects the recovery in the two components in the future. In the first all, the data should keep market expectations for further BOJ easing as early as October.
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