Today both Chinese and Japanese equities are benefiting from perceptions that monetary authorities will maintain their largely proactive and accommodative stances towards fostering economic growth. Despite a total debt to GDP load of 282% and a series of corporate defaults, earlier this week Chinese authorities cut the bank reserve requirement by 1% in order to combat a flagging economy which is posting the lowest year on year growth figures in decades.  While the Chinese economy contends with declining exports, industrial production, and mounting loan losses, the Shanghai composite continues its robust performance with today seeing a 2.5 % increase capping off a twelve month return of 112%.  Similarly, the Nikkei has closed out a positive trading session attaining highs not seen in 15 years as markets digested news that Japan posted its first trade surplus since June 2012.  While equity markets have taken this as a positive the overall impact from a currency perspective has been muted with the yen in the mid 119 level versus the buck, largely in line with the levels we have seen since the beginning of the year and the CNY largely unchanged in its trading band.

Kicking off a European session which remains underway was the release of meeting minutes from the Monetary Policy Committee of the Bank of England, the tone of which was largely considered bullish on the Eurozone and prospects of a potential increase in inflation in the UK in the second half of 2015.  While the UK economy has posted very impressive employment, wage growth and manufacturing data in the years after the financial crisis, the spectre of inflation at this present moment remains subdued.  In light of this, the BoE have opted to maintain rates as is, despite two members of the committee indicating that they would favour a rate increase sooner rather than later should inflation pick up. They outlined expectations that growth in the Eurozone economy will accelerate as the effect of the ECB’s asset buying program begins to take hold and that this would provide a tailwind for British exports which would in turn have an inflationary impact. Reaction to the minutes have been positive for  sterling, gaining against the greenback, yen, and euro, changing hands in the mid-1.50s, 180s and 1.40s versus the respective currencies.

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