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CNY

15 Dec 2023

A slow and steady recovery.

While nominal interest rate differentials may favour the US dollar for some time, we believe this renminbi headwind has topped out. Diverging growth trends should continue to assert themselves as a currency tailwind. In a world economy where recession risks ought to endure for many major economies, a sturdier China should encourage renminbi-positive capital inflows. Our baseline view is that the renminbi gradually strengthens over 2024. When combined with a softening US dollar, we see the exchange rate edging down to 7.05 by mid-2024 before moving sub-7.00 later in the year. China credit impulse and activity, annual % change

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14 Dec 2023

Christmas comes early to financial markets

The dollar plunged yesterday when the policy elves at the world’s most powerful central bank met markets halfway, indicating they expect to cut rates at least three times next year, and four times in 2025. Perhaps more importantly, a jolly Jerome Powell chose not to fight back against an ongoing loosening in financial conditions in the post-meeting press conference, instead pointing to a series of indicators showing the economy achieving a soft landing and suggesting inflation could come down without a rise in unemployment. Some of the fervour is cooling this morning, but not much. With markets now pricing in...

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13 Dec 2023

Markets wait to exhale

Equity futures are setting up for a positive open, Treasury yields are flat across the curve, and the dollar is holding steady ahead of this afternoon’s Federal Reserve decision. Yesterday’s November inflation report showed price growth levelling off well below post-Covid highs, while also remaining above the Fed’s comfort threshold. Underlying inflation accelerated on a month-over-month basis, and the so-called “supercore” measure—core services excluding shelter costs—often mentioned by Jerome Powell, climbed at an annualized 5.2 percent. According to a separate report, real earnings climbed 0.8-percent in the year to November. This doesn’t mean that progress in reducing inflation is reversing—the...

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10 Dec 2023

US Fed in focus this week

• US jobs. Payrolls were a bit higher than forecast & US unemployment dipped. US equities & yields rose giving the USD some support.• FX moves. The USD rebound was modest. Most of the major pairs, including the AUD, only slipped back to where they were tracking the day earlier.• Event radar. Locally, jobs data is due. Offshore, the US Fed, ECB & BoE meet. On top of that US CPI & retail sales are released, as is the China data batch. Positive sentiment across financial markets continued into the end of last week. A better-than-expected US labour market report...

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03 Dec 2023

USD doldrums continue

• Fed speak. Some measured comments by Chair Powell & weaker ISM data reinforced expectations the next move by the Fed could be a rate cut.• USD weaker. The drop in US bond yields has exerted more pressure on the USD. AUD has risen back up to the top of its multi-month range.• Event radar. Locally, the RBA’s last meeting of ’23 & Q3 GDP are due. Offshore, focus will be on US labour stats with non-farm payrolls rounding things out. Downward pressure on US bond yields and the USD returned on Friday with the previous days rebound fleeting. Comments...

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