Asia followed the “suspended” FOMC decision, with a hard point plot, by buying US dollars during the session. The Euro, the British Pound, the New Zealand Dollar, the NZD (and the Yuan, but I’ll get to that in a moment) have all fallen against the Big Dollar. But the yen was the biggest loser. USD/JPY took a peek above 141 and Not too far from Up there as I post. That was more than 100 pips off the session low. The sharp decline of the yen (up vs. yen crosses) prompted some verbal intervention from Japan’s Chief Cabinet Secretary Matsuno. Weak things were, along the lines of the usual ones including:
It is important for foreign currencies to move steadily reflecting the fundamentals of the economy
Yada yada yada If you want to know what to listen to when Japanese authorities get serious about signaling actual intervention, check out this post here:
Meanwhile, she was busy from China Today. The People’s Bank of China forced us to cut the interest rate again. A 237 billion yuan one-year medium-term lending facility (MLF) was issued, with a reduced interest rate of 2.65%, from 2.75%.
The People’s Bank of China had already cut two other interest rates this week:
The bank is expected to cut base rates for the loan next week. This is scheduled for Tuesday the 20thy. The current LPRs are:
- 3.65% for one year
- 4.30% for five years
After the People’s Bank of China (PBOC) rate cut, we had data from China indicating slower-than-expected industrial production and retail sales growth in May. The other statements were a bit harsh. However, the data point that will really concern the CPC Politburo is that youth unemployment in China reached a record high of 20.8% in May. This will keep the stimulus guesses at boil. China’s faster growth would be a positive input for the global economy.
The external yuan weakened further in the session. USD/CNH briefly jumped to a high around 7.19.
We also have indicative data from Australia today. The May labor market report showed huge beats on jobs added and unemployment. Australia’s yield curve has inverted for the first time since the 2008 global financial crisis as speculation over rate hikes from the Reserve Bank of Australia intensifies and recession risks mount. Speaking of recession, first quarter GDP data from New Zealand confirmed during the session that the country has slipped into recession. This was the second consecutive quarter of negative GDP on a quarterly basis i.e. an economic contraction. This is the accepted definition of recession.
Asian stock markets:
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Japan’s Nikkei 225 +0.3%
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China Shanghai Composite +0.2%
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Hang Seng in Hong Kong +0.6%
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Cosby in South Korea -0.4%
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Australia S&P/ASX 200 +0.25%