Strange reasons to cheer China

19 January, 2016

So, here is the thing. The headlines on China are not that market friendly, slowest quarterly growth since 2009, or slowest growth for the year as a whole in 25 years. Yes equity markets have rallied strongly, shaking off the negative sentiment that has cloaked them for most of the year to date. One reason put forward is the expectation of Chinese stimulus. So China is in a funk because of the huge debt built up in 2008 onwards as it fought off the effects of the global financial crisis, but markets are excited because China may instigate stimulus to counteract slowdown fears. That can only mean more rate cuts or reductions in the required reserve ratio for banks. There is also scope for the currency to take some of the strain, but not yet, given the recent developments and especially on the off-shore yuan. Some of the trends of the year so far in currencies have unwound as a result, most notably the strength in the yen reversing taking USDJPY back towards the 118.00 level. Other moves have been more reluctant to unwind, such as weakness in sterling which largely remains in place, cable having displayed a very weak bounce from the 1.4250 level towards 1.43 overnight. More notable has been the reversal in USDCAD, which up to now has not seen a down day for all of this year as it has moved from 1.38 to 1.4650.

Sterling will remain in focus today with the release of UK CPI data at 09:30 GMT, where the headline rate is seen rising from 0.1% to 0.2%, the core rate seen steady at 1.2%. Sterling has clearly taken a battering for most of the year, so could be vulnerable to a short squeeze on firmer than expected data. Final data for the Eurozone is also seen at 10:00 GMT (expected steady at 0.2%). Both the ECB and BoE are expecting headline inflation to rise substantially in the early months of 2016 as the effects of the fall in energy prices a year ago fall out of the calculation (base effects, as they are called), but for both this rise is likely to be less than expected given the latest oil price developments.


Source link  
Divergence Between Fed and BoJ

The March FOMC meeting will be held for two consecutive days from today. The interest rate decision will be announced at 18:00 GMT on Wednesday 15th March...

Market Volatility Expected Ahead of President Trump's Speech

In a speech that will be watched by millions of viewers in the United States and around the world, the President is expected to speak of his presidency and address pressing issues like his plans for health care, the tax system, the military, and his goals for his administration...

Gold Trades Below Resistance Ahead of the Fed and NFP

We will see the release of the US ISM Manufacturing PMI, and ISM Prices Paid for January, at 15:00 GMT on Wednesday 1st February...


Sterling Struggles Ahead of Theresa May's Speech

Theresa May will make a speech outlining her plans for Brexit tomorrow, Tuesday 17th Jan, before the UK triggers Article 50 to leave the EU...

Dollar Turn-around on Trump's Press Conference

President Elect Trump's first press conference after his victory in the US presidential election, was held yesterday around at 16:00 GMT. It has caused great volatility to the dollar and the markets...

Gold Nears Major Resistance Ahead of Trump’s Press Conference

Gold prices have rebounded since mid-Dec after testing the significant support line at 1120. On the 4 hourly chart, gold bullish momentum has been strengthened since the beginning of this year, helped by the dollar retracement...


Searching for a new narrative

Popcorn at the read today as President elect Trump has a scheduled news conference later in the day (around 16:00 GMT). Markets have become used to listening to him in 140 characters or less over the recent weeks, so a more elongated narrative should be welcome...

The sterling conundrum

Yesterday's early weakness in sterling, on the back of the latest comments from PM May surrounding Brexit, took cable close to key support levels and the resilience seen through most of the post US election period has been unwound...

Selling into USD strength

In summary, Friday US jobs report was pretty much in line with expectations, although the slightly better data on earnings gave some support to the dollar into the end of the week. As a result, the US currency was little changed from Tuesday opening levels...

  


Share: