Gaining some stability on China

1 March, 2016

There was a month end feel to the pattern of trading yesterday. Sterling found some strength towards the end of the European session, although in comparison to the losses seen over the past four weeks, the moves at best represented a “dead-cat bounce” at best. Data released yesterday showed that overseas investors sold UK government bonds (Gilts) by the biggest amount since March 2014. This fits with the de-coupling of sterling from rate differentials that was seen during the month (see “Will Brexit Break Sterling”). There could be more of this to come, depending how the polls go between now and the referendum in June. At present, they are not giving a decisive view one way or the other, hence the continued prevailing uncertainty.

The timing of the PBOC’s cut in the RRR (required reserve ratio) yesterday was interesting, coming the weekend after the G20 meeting. Make of that what you will. For today, there is the usual hand-waving at the China PMI data, with the manufacturing data seeing the seventh consecutive decline (from 48.4 to 48.0). The reaction in equities and elsewhere was muted, perhaps because we are now seeing a policy reaction from the Chinese authorities, so we’ve seeing the Aussie recover and equities reversing most of the losses seen through yesterday. Aussie rates were kept on hold after the interest rate meeting today, with the accompanying statement acknowledging that the domestic and global environment were likely to keep inflation low over the next two years. They re-iterated that “Continued low inflation would provide scope for easier policy, should that be appropriate to lend support to demand”. The market continues to price in some risk of a cut in rates later this year, although this is not yet fully priced for the year as a whole. We have more PMI data in the Eurozone up to 09:00 GMT, with UK data at 09:30 GMT and then ISM manufacturing (the US PMI equivalent at 15:00 GMT).


Source link  
Gold Bears Test Near Term Major Support

Gold spot price has turned bearish since 27th Feb, after hitting a one-and-a-half month high of 1263.73...

GBPUSD Retreats Post Surge on Theresa May’s Hard Brexit Speech

Trump stated on Tuesday that a strong dollar is risky to the US economy, as it weakens competitiveness of US exports and corporate profits...

The dominant dollar

The dollar appreciated a further 1% through the course of Thursday in the wake of the Fed meeting result seen Wednesday evening. We saw some pull-back into the NY close and again through the Asia session...


Crossing the Bridge

The usual bridge day between Thanksgiving and the weekend arrives which will keep volumes light and ranges on the tighter side, all being well. That’s unless you are a retailer, in which case this is known as ‘Black Friday’, a phenomenon that has crossed the Atlantic in recent years...

Finally

Markets and polling are looking for a Clinton win today, but the margin in the polling is not sufficient to give any sense of comfort. This is more so after the experience of the Brexit vote back in June, where the polls were suggesting a win for the ‘remain’ side and the vote went the other way...

Gearing up for higher US rates

The move higher on the US 2Y bond yield has had a notable effect on currencies over the past week, with the yield pushing at levels last seen 4 months ago. This reflects the increased expectation that the Fed will move on rates at the December meeting...


Dollar Index Retraced after Testing the Significant Resistance at 96.00

The US CPI figures released last Friday were better-than-expected. The dollar index surged, broke three resistance levels at 95.40, 95.60 and 95.80 respectively...

Last Full US Economic Health Check Before FOMC

The dollar index has rebounded since 8th September after tested the support line at 94.50. On 13th September, the index broke the downtrend line resistance and held...

Oil Slide Weighs on Energy Stocks

The weekly US Crude Oil Inventories figure released yesterday was 2.276 million barrels, less than the previous figure of 2.501, yet surpassing the expectations of 0.921...

  


Share: