Did the PBOC Signal it is Content with the Yuan’s Pullback?
• This week’s dollar pullback stalled yesterday and it is largely consolidating so today.
• The BOE is expected to wait until August, after the economy re-opens and new economic forecasts are provided before adjusting its bond-buying program.
• If the PBOC’s reference rate offer is still a form a guidance, it has moved back into line with expectations, suggesting officials may be content with the paring of recent yuan gains.
• South Korea’s central bank signaled it will hike rates later this year.
• Although there are several US reports today, the most important for the market may be the weekly jobless claims, which unexpectedly rose in last week’s report, and durable goods orders that are expected to rebound after the weakness in April. The Federal Reserve also publishes the result of its bank stress tests. It is expected to lead to a boost in dividends and share buyback announcements.
• The central bank of Mexico meets today. Although no change in policy is expected, it can begin prepare the market for a rate hike in H2.
The US dollar is trading slightly lower against most of the major and emerging market currencies. The Scandis are leading the major currencies, while the Russian ruble leads the central and eastern European currencies higher. Emerging market currencies are mostly firmer, though the Turkish lira and South African rand are notable exceptions. The JP Morgan Emerging Market Currency Index is higher for the fourth session.
A clear signal by South Korea’s central bank of a rate hike later this year underpinned the won. The Bank of England meets but is unlikely to adjust policy. Mexico’s central bank meets later today, and while it too will likely standpat, it may signal that it is closer to raising rates.
Meanwhile, after the NASDAQ set a record high yesterday, Asia Pacific markets turned in a mixed performance. Japan and Australia were sporting small losses, while China, Hong Kong, South Korea, Taiwan, and India all advanced. Europe’s Dow Jones Stoxx 600 is higher for the fourth consecutive session, and US futures are also firmer.
The US 10-year yield is numbing against the 1.50%-mark, and European yields are slightly firmer.
Gold has steadied around $1780 after pulling back from approaching $1800 yesterday. Oil has also steadied. Although US inventories continue to be drawn down, OPEC+ meets next week, and Russia is pushing for a boost in production. Steel rebar and iron ore prices firmed, but copper’s three-day rally stalled. Lumber rose yesterday for the third time in four sessions, and grain prices gained to help the CRB Index extend its gains for the fourth consecutive session yesterday, the longest advance since early May.
Bannockburn Global Forex