Chinese monetary authorities have expressed some calm today after two surprise devaluations this week to their currency. Global markets have been a sea of red for much of this week after the People’s Bank of China took the surprising action of devaluing the yuan by as much as 4% in less than 48 hours. Today, things have steadied a bit after PBoC Vice-Governor Yi Gang said there was no basis for more devaluation in light of strong domestic economic fundamentals. There have been some rumors going around the market the PBoC is seeking a 10% devaluation but for now, those rumors are disputed as “nonsense” from Chinese decision makers. European shares and commodity prices rallied overnight and is setting the table for a smooth opening here in North America.
A number of inflation reports were released overnight, to little fanfare. German, French, Italian and Spanish CPI results were a mixed bag, having little impact on the euro. None the less, the single currency continues to slide off of Wednesday’s highs, giving some relief to a nervous (and short) EUR/USD market. About an hour ago, the minutes of the July ECB meeting were released for the first time. European policymakers noted Chinese volatility could have an impact that is bigger than expected on the EU’s delicate economic recovery, while also noting a US rate hike may also present “headwinds.” Real GDP in the EU remains mired near 2008 territory and forward guidance is hinged on industrial output rebounding from dismal springtime results. Surprisingly enough, the ECB expressed very little worries over Greece, arguing any risks were contained as leaders continue to drive toward an agreement.
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