Risk-taking was the name of the game during the Asian session, as softer-than-expected tariffs and the easing of yuan devaluation concerns encouraged the bulls to party in the streets.
- New Zealand’s Westpac consumer sentiment slips from 108.6 to 103.5 in Q2 2018
- New Zealand’s prints 1.62B NZD current account deficit vs. 1.23B shortfall expected
- Japan’s trade deficit widens from -0.10T JPY to -0.19T JPY in August
- BOJ holds policies steady as expected in September
No devaluation for the yuan?
In a speech at the World Economic Forum in Tianjin, Chinese Premier Li Keqiang talked about China’s strong fundamental economic prospects.
What made investors sit up and take notice is that Li also assured that the world’s second-largest economy won’t devalue its currency to make its exports more competitive.
The official said that “[r]ecent fluctuations in the renminbi exchange rate have been seen as an intentional measure, but that isn’t true,” adding that (emphasis mine):
“One-way devaluation will do more harm than good to China’s economy. China will by no means stimulate exports by devaluing the yuan.”
BOJ maintains current policies
As expected, the Bank of Japan (BOJ) kept its monetary policies steady in September.
In a 7-2 vote (Kataoka and Harada dissented), BOJ members are still applying a -0.1% interest rate on financial institutions’ accounts.
10-year JGB yields are also still targeted “at around zero percent” but “may move upward and downward “to some extent.”
BOJ believes that the economy will continue its “moderate expansion,” with exports getting its boost from “firm growth in overseas economies” and CPI expected to “increase gradually” to the 2.0% target.
Interestingly, Kataoka also said “nuh-uh!” on the possibility of inflation hitting 2.0%, saying that the possibility “was low at this point.” Yikes!
Still, today’s decision was widely expected, so the yen barely reacted to the event. All eyes are now on Governor Kuroda’s presser where we’ll see if central bank members are worried about other issues other than inflation.
Make sure you stick around!
Overall risk appetite
Asian session traders took cues from their U.S. counterparts and celebrated the fact that the U.S. and China both announced softer-than-expected tariff measures this week.
For reference, the U.S. is planning on imposing 10% dues (instead of 25%) on $200B worth of Chinese goods, while China will impose a 25% tariff on $60B worth (instead of $200B) of U.S. goods.
It also didn’t hurt that we’ve been seeing positive Brexit-related headlines lately.
- Nikkei is up by 1.33% to 23,731.8
- A SX 200 is up by 0.01% to 6,195.2
- Shanghai index is up by 0.97% to 2,726.268
- Hang Seng is up by 0.97% to 27,348.1
Commodity prices jumped on the risk-taking bandwagon, with gold taking advantage of a bit of dollar weakness while crude oil benchmarks extended their rallies despite a bearish stockpiles report from API.
- Gold is up by 0.26% to $1,201.00 per troy ounce
- Brent crude oil is up by 0.08% to $78.95 per barrel
- U.S. WTI is up by 0.16% to $69.82 per barrel
Major Market Mover(s):
The Aussie, which has tracked the yuan’s movements in the past, got a boost from Li’s comments about China not devaluing its local currency to boost its exports.
Not surprisingly, comdoll-related Kiwi also found support from Li’s statements.
AUD/USD is up by 19 pips (+0.27%) to .7283; AUD/JPY is up by 23 pips (+0.28%) to 81.34; AUF/CHF is up by 19 pips (+0.27%) to .6981; AUD/NZD is up by 16 pips (+0.14%) to 1.0977; EUR/AUD is down by 35 pips (-0.22%) to 1.6124, and GBP/AUD is down by 45 pips (-0.25%) to 1.8165.
NZD/USD is up by 11 pips (+0.17%) to .6594; NZD/JPY is up by 15 pips (+0.21%) to 74.10; NZD/CHF is up by 64 pips (+0.23%) to .6360; GBP/NZD down by 21 pips (-0.11%) to 1.9938, and EUR/NZD is down by 14 pips (-0.08%) to 1.7698.
Watch Out For:
- BOJ Governor Kuroda’s press conference
- 5:45 am GMT: Switzerland’s SECO economic forecasts
- 8:00 am GMT: Euro Zone’s current account (22.4B EUR expected, 23.5B EUR previous)
- 8:30 am GMT: U.K.’s inflation reports. Read our mini trading guide to see what you can expect from the event!
- 8:30 am GMT: U.K.’s house price index (y/y) (3.2% expected and previous)