Asia
followed up the ‘on hold’ Federal Open Market Committee (FOMC)
decision, with a hawkish dot plot, by buying US dollars during the
session. EUR, GBP, NZD, NZD, AUD (and yuan, but I’ll come to that
in a bit) all fell against the big dollar. But yen was the biggest
loser. USD/JPY took a peek above 141, and its not too far from above there
as I post. That was up over 100 points from the session low. The
sharp move down for yen (up for yen crosses) prompted some verbal
intervention from Japan’s chief cabinet secretary Matsuno. It was
weak stuff, along the usual lines including:
- Important
for FX to move stably reflecting econ fundamentals - Closely
watching fx moves closely - Desirable
for forex to move in stable manner
Yada,
yada, yada. If you’d like to know what to listen out for when
Japanese authorities get serious about signalling actual intervention, check out this post here:
Meanwhile, it was busy from China today. We had the People’s Bank of China
make another rate cut. A 237bn yuan one-year Medium-term Lending
Facility (MLF) was issued, at a reduced interest rate of 2.65%, from
2.75%
The
PBOC had already cut two other policy rates this week:
The
Bank is expected to cut Loan Prime Rates next week. This is scheduled
for Tuesday the 20th.
Current LPRs are:
- 3.65%
for the one year - 4.30%
for the five year
After
the PBOC rate cut we had data from China indicating slower-than-expected industrial output and retail sales growth in May. Other data was
also a little dour. However, the data point that is really going to
concern the Chinese Communist Party Politburo is that youth
unemployment in China hit a record high of 20.8% in May. This’ll
keep stimulus speculation on the boil. A faster-growing China would
be a positive input for the global economy.
The
offshore yuan weakened further on the session. USD/CNH popped briefly
to highs circa 7.19.
We
also had instructive data from Australia today. The May jobs market
report showed massive beats on jobs added and unemployment. Australia’s
yield curve inverted for the first time since the 2008 global
financial crisis as speculation of further Reserve Bank of Australia
rate hikes intensified and recession risks heightened. Speaking of
recession, Q1 GDP data from New Zealand during the session confirmed
the country had slipped into recession; it was the second consecutive
quarter of negative q/q GDP i.e. economic contraction. This is the
commonly accepted definition of an economic recession.
Asian
equity markets:
-
Japan’s Nikkei 225 +0.3%
-
China’s Shanghai Composite +0.2%
-
Hong Kong’s Hang Seng +0.6%
-
South Korea’s KOSPI -0.4%
-
Australia’s S&P/ASX 200 +0.25%