Forex and Bitcoin news for Asia trading Wednesday 27 June 2018
- Chinese President Xi warned provinces, ministries to prepare for full-scale trade war
- Fitch ratings on the BOJ's "stealth" tapering
- China Comm Ministry to assess impact of expected US investment restrictions
- China industrial profits for May: +21.1% y/y (prior +21.9%)
- PBOC sets USD/ CNY reference rate for today at 6.5569 (vs. yesterday at 6.5180)
- Russian energy minister Novak met with Mnuchin - discussed Russia sanctions
- NZ data - Business Activity Outlook +9.4% in June (+13.6% prior)
- BoA/ML on the trade wars impact: "a notable drag on growth"
- Poll of economists: Higher expectations of recession, Fed to hike 2 more times this year
- DB on FX: a lower US dollar. & Forecasts for USD/JPY, EUR/USD, S&P500, oil
- Trump economic official Everett Eissenstat to resign
- Yonhap report that "North Korea makes rapid improvements to nuclear facilities"
- EUR/USD technical analysis - 'significant support area'
- New Zealand trade balance for May: +294m (expected +100m)
- US trade rep Lighthizer calls trading partners hypocrites, says US will protect its interest
- BOJ dep gov Amamiya says the Bank is a long way from exit
- S&P on the US: 'AA+/A-1+' ratings affirmed, outlook remains stable
- Oil - inventory survey shows much larger than expected draw
- Canadian fin min says Canada will absolutely support tariff-hit industries
The People's Bank of China slashed the price of the onshore yuan at the daily reference rate setting yet again today, providing further evidence for proponents of the 'weaponized yuan'. There are uncertainties about China using its currency as a tool in the trade war, but if they are retaliating they are doing so first, before the first tariff shots have been fired!
Apart from the rising tensions on trade, of broader concern is the background to the falling exchange rate devaluation:
- Slowing growth
- Shanghai Composite bear market
- Rising defaults
- Monetary easing (PBOC cut the RRR again over the weekend)
We are yet to see large capital outflows, which occurred the last time there was such a big yuan fall (2015) ... but the signs are building (About that weaker CNY setting from the PBOC ... to encourage capital outflow?).
ps. For more on the yuan, check this out from Justin yesterday: Is China back on the yuan devaluation horse again?
Also on the move here in Asia today was the yen. USD/JPY traded up into the Japanese morning but on approach to the daily Tokyo fix it slipped back under 110 and then dropped further. I nominated 109.70/80 as some short-term support and, well, so far so good. AUD and NZD also fell, against the USD sure but very notably against the better yen. The catalyst for the kiwi seemed to come from ANZ's business survey which showed another sharp drop in business confidence, and lower outlook for activity.
The RBNZ announcement is tomorrow, and the corporate sentiment wobble may give the Bank something ponder.
EUR, CHF, GBP were all held in small ranges. The CAD weakened against the USD but has recovered to be not too much changed on the session. Bank of Canada Governor Poloz speaks Wednesday.
Gold fell, down a few dollars on the session. Oil popped upon release of the private inventory data (late NY time), it shoed a much bigger headline draw than was expected.
Still to come:
- Big speech from Poloz coming up on Wednesday
- FX options expiring at the 10am New York time cut today, Wednesday 27 June 2018
- Preview of the RBNZ meeting - cash rate to remain on hold
- Heads up for larger FX options expiring later this week
- And next week …. RBA meeting preview - could contribute to the AUD/USD falling to 0.7200
