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  
Oil Slumped Post OPEC Extension

On Thursday, OPEC announced that the existing output cut agreement will be extended for an additional 9 months...

USD Bounces From Month Low

Trump administration has presented its 2018 budget plan to Congress last evening. The budget plan calls to slash $3.6 trillion...

Dollar index hit a new low

The dollar index hit a new post presidential election low of 96.95 on Friday May 19th. EUR/USD hit a high of 1.1211...


USD Hit Post Election Low

To date the dollar index has almost given up all of the post presidential election rally...

BoE Expected to Keep Rates Steady

ECB Governor Draghi will make a speech in the Dutch Parliament at 12:00 BST today. It will be Draghi first speech...

Trump's Tax Reform Plan

US Treasury Secretary Mnuchin announced Trump’s tax reform plan in a press conference...


Corporate Earnings Lift US Stocks

Last week the US President Trump stated on twitter...

Market Concerns Eased

The first-round voting of the French presidential election was revealed on Sunday night...

Dollar Plunged on Trump Second Statement

The dollar index fell to a 2-week low of 99.91 in the early hours...

  


Share: