The Yuan
Another ominous signal from this mornings Yuan fix has sent Yuan bears into action. While the counters cyclical mechanism pegged the fix lower than yesterday close, we’re still trading at year highs suggesting the central bank is in no rush to stem the weakening tide. However, this does run contrary to statements from the bank overnight that they will not use the Yuan as a tool in a trade war, but as history reminds us, the Pboc remains very fluid when it comes currency policy.
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Equity market reaction
The local equity markets, along with global equity index futures markets are not reacting well to traders pushing the Yuan envelope, USDCNH higher. Market continue to underprice the destabilising effect of a weaker Yuan will have on global equity markets.
Gold Market
While keeping a close eye on equity sentiment, gold traders gently buying gold in the event the latest markets developments could trigger and downwards spiral on global equities. While I don’t believe this is a significant enough trigger at this stage, but when compounded with the potholed encumbered landscape, it’s worth keeping an eye on
Oil Markets
Batten down the hatches Hurricane Micheal is intensifying, adding some support to prompt contracts
Japanese Yen
Price action can be very deceiving, a ten-pip range in USDJPY but given the heightened level of discussions around Yen and BoJ this morning, something is going to give.
Japan’s economy is alive kicking by any measure but today’s over the top machine orders data that printed 6.8%MoM versus -3.9% expected and the YoY number rose by 12.6% versus 1.8% is a stunner by any stretch of the imagination prompting the Cabinet Office upgraded its assessment of machinery orders, saying they are in recovery.
The markets are still positioning for to a 115-year-end target of USDJPY, but the economic revival along with the weaker Yen of late does suggest the BoJ does have some wiggle room to tack to a more hawkish target.
Australian Dollar
Not to unexpectedly the Australian dollar ran into a wave of interbank offers and has traded off intersession highs.
