It
was an active session for economic data with the focus on China’s
second manufacturing PMI. Last week we had the official PMIs, from
China’s National Bureau of Statistics (NBS). The official
manufacturing PMI stayed in contraction for its third consecutive
month. On the contrary, today we got the S&P Global/Caixin China
Manufacturing PMI, for June, which expanded. While it fell by 0.4 of a point from
May, to 50.5, it remained in the expansion zone and beat the central
estimate of 50.2.
As
an aside, we also had manufacturing PMIs from Japan and South Korea.
Both contracted.
There
were plenty of other data points, as shown in the bullet points
above. Apart from the Chinese PMI the other data of most note was the Bank of
Japan Q2 Tankan survey, which improved markedly from Q1 and quarters
before. As part of the Tankan publication is the Tankan price
expectations survey, which indicated firms expect the CPI in Japan to
remain above the BOJ 2% target for the next five years. If the BOJ
ever switches to the same expectation from its current view that
inflation is transitory its reasonable to expect a pivot away from
ultra-loose monetary policy.
As
I update USD/JPY is not showing much of a sign of this, though, its
spent the session mostly ticking higher. Its not yet testing last
week’s high though.
The
People’s Bank of China set the onshore yuan, CNY, much stronger
than expected at the daily reference rate fixing today and drained a
hefty 400bn+ yuan in open market operations.