Any hope for China's bruised yuan?
STOXX 600 up 0.4%
France faces political deadlock
Wall Street futures steady
Welcome to the home for real-time coverage of markets brought to you by Reuters reporters. You can share your thoughts with us at markets.research@thomsonreuters.com
ANY HOPE FOR CHINA'S BRUISED YUAN?
China's yuan has weakened steadily this year, and Barclays analysts on Monday took a look at some of the catalysts that could spark a rebound to see if any of those seem likely.
Spoiler alert: they say they do not.
The dollar has risen about 2.5% on China's yuan traded onshore CNY=CFXS so far this year, and is currently around its highest since November, on the back of broad dollar strength, weak Chinese activity and worsening external pressures.
So what factors could change that, and how meaningful are they?
Economic growth is the first thing Barclays considers. But high-frequency indicators point to slowing Chinese GDP and the analysts say they do not expect major stimulus announcements from a key meeting this month, the third plenum of this iteration of the Chinese Communist Party's central committee.
Then, there are capital inflows. But they don't see these as likely either, given deflationary pressures in China, as well as geopolitical tensions. These are unlikely to help if Donald Trump were to win November's U.S. presidential election.
On the U.S. side, Treasury yields could fall, causing China-U.S. rate differentials to narrow. But there is a slim chance of this happening dramatically, Barclays says. They only predict one rate cut from the Federal Reserve this year. (Market pricing leans towards two, but this wouldn't change the dial much).
Lastly is a more aggressive policy stance from China to stem weakness. The People's Bank of China have several tools they could use, but Barclays conclude that "in the past such measures have only stalled the inevitable, and we would expect the same if utilised against a market that remains overwhelmingly bearish CNY."
(Alun John)
*****
EARLIER ON LIVE MARKETS:
LONG FINANCIALS "MAKES SENSE" AS TRUMP TRADE CLICK HERE
STOXX FLIPS INTO THE BLACK CLICK HERE
CAC 40 FUTURES LEAD DECLINES IN EUROPE CLICK HERE
FRENCH LEFT OUTFLANKS THE RIGHT CLICK HERE
Related Assets
Latest News
Disclaimer: The XM Group entities provide execution-only service and access to our Online Trading Facility, permitting a person to view and/or use the content available on or via the website, is not intended to change or expand on this, nor does it change or expand on this. Such access and use are always subject to: (i) Terms and Conditions; (ii) Risk Warnings; and (iii) Full Disclaimer. Such content is therefore provided as no more than general information. Particularly, please be aware that the contents of our Online Trading Facility are neither a solicitation, nor an offer to enter any transactions on the financial markets. Trading on any financial market involves a significant level of risk to your capital.
All material published on our Online Trading Facility is intended for educational/informational purposes only, and does not contain – nor should it be considered as containing – financial, investment tax or trading advice and recommendations; or a record of our trading prices; or an offer of, or solicitation for, a transaction in any financial instruments; or unsolicited financial promotions to you.
Any third-party content, as well as content prepared by XM, such as: opinions, news, research, analyses, prices and other information or links to third-party sites contained on this website are provided on an “as-is” basis, as general market commentary, and do not constitute investment advice. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, it would be considered as marketing communication under the relevant laws and regulations. Please ensure that you have read and understood our Notification on Non-Independent Investment. Research and Risk Warning concerning the foregoing information, which can be accessed here.
