- China aims for reasonable, balanced exchange rate
- global markets arent stable yet
- global market turbulence means China needs caution
- China can speed up reform if global markets stabilize
- will move to interest rate liberalization
- wants to have policy rates to guide market rates
- PBOC preparing 2 or 3 policy tools for short and mid term rates
- other central banks have similar tools
- interest rate liberalization can be completed in 2 years but depends on external conditions
Peoples Bank of China governor out on BBG
Forex trading headlines for Asia Thursday 10 July 2014
The Australian dollar was a focus today in the session. It spent the early going finding support around 0.9410 and from there it edged higher as we approached the release of the June employment report. These reports are notoriously volatile and can produce FX volatility in their wake … and today didn’t’ disappoint. The data itself was a mixed bag. Westpac said of it, for example, that if you look you can find something in the June Labour Force Survey to fit any current view on the Australian economy. The AUD initially jumped to hit 0.9457 but then got sold down rapidly to 0.9410/15. Chinese trade data was next, 30 minutes later, and on this clearly disappointing result the AUD fell again; it headed briefly, and only by a few tics, below 0.9400, bounced a measly 10-odd points and then fell back below the figure (barely) as I type.
The Kiwi $ had a much smaller range, popping above overnight highs (by a few tics only) before giving back 15 or so points.
The yen strengthened a small amount, dropping about 10 points against the USD (maybe 15) and lying on the floor there. EUR/JPY was similar, but a tiny bit of a move higher in EUR/USD (when I say tiny, we’re talking less than 10 pips) kept it from looking too awful (it only appears to have one foot in the grave as I type).
Cable popped fleetingly toward 1.7165 and then drifted 15 points back down.
USD/CAD was basically sideways, swissy too.
Gold added a few bucks, oil continued its overnight drift off a little more.
The trade data is here: China trade balance for June: +$31.60 bn (vs. expected +$36.95bn)
Via Reuters comes this from Li Huiyong, an economist at Shenyin & Wanguo Securities in Shanghai:
- Said exports should support China’s growth in the second half of the year, even if Beijing may miss its 2014 trade growth target
- “We think China could miss its target for trade growth this year of 7.5 percent
- We expect combined exports and imports to rise 5 percent in 2014 from a year ago
- The recovery in exports will help the recovery of China’s economy in the second half of this year. At least, we think exports will not be a drag on the broad economy”
After selling off in the wake of the employment data from Australia and the trade data from China the AUD has picked itself up off the floor. Barely. More sellers await now around 0.9410/15 and through to 20 though.
Some news from Korea today in the wake of them leaving interest rates unchanged earlier, Comments from head of the central banK:
- Says downside risk to economy bigger than upside risk
- 2014 GDP growth, inflation forecasts downgraded
- Thursday’s rate decision was not unanimous
- 2014 GDP growth forecast cut to 3.8 pct vs prev 4.0 pct
- 2014 inflation forecast cut to 1.9 pct vs prev 2.1 pct
- Growth forecasts downgrade mostly due to effect from ferry accident
- Current policy interest rate at accommodative level
- Negative output gap may have expanded
I posted these to Twitter as they came out … be sure to be following @ForexLive!
China trade balance for June: +$31.6 bn
- expected +$36.95bn, prior was $35.92bn
Exports: +7.2% y/y
- expected +10.4%, prior was +7.0%
Imports: +5.5% y/y
- expected +6.0%, prior was -1.6%
Comments from China customs office (spokesman Zheng Yuesheng):
- Export growth seen quickening in Q3 from Q2
- China trade improves on policy effects and a stabilizing economy
- China’s government policies boost exporters confidence
I posted these to Twitter as they came out … be sure to be following @ForexLive!
Employment Change for June: +15.9K
- expected 12.0K, prior -5.1K, revised from -4.8K
Unemployment Rate June: 6.0%
- expected 5.9%, prior 5.9%, revised from 5.8%
Full Time Employment Change June, -3.8K
Part Time Employment Change June, +19.7K
Participation Rate June, 64.7%
- expected 64.6%, prior was 64.6%
Aggregate monthly hours worked increased 15.1 million hours (0.9%) to 1 ,629.1 million hours
- Strong employment gain, driven by part-time employment.
- Unemployment rate is higher on the month, as more people come back into the job market, the participation rate rising on the month
AUD/USD jumped to 0.9457 and is now much lower, under 0.9415 as i type. the market was optimisitic going into this figure and, it appears, a bit long of AUD.
From the Australian Bureau of Statistics:
ANZ economist Fabo:
- “We saw a strong risk of an above-market rise in employment in June reflecting some statistical payback after the fall in employment in May (which, in our view, partly reflected seasonal adjustment difficulties)
- The ‘payback’, however, was less than we expected so it was, at best, a soft outcome…
- Most forward looking indicators suggest that forthcoming jobs growth should be stronger than the 7K per month recorded in Q2
- We expect employment growth to pick up to just shy of 15K per month over the second half of the year and for the unemployment rate to remain around 6 per cent over the next year or so”
- If unemployment continues to trend higher, & Q2 CPI was also lower than expected, it raises the risk of an unexpected RBA rate cut
- But the RBA has already said previously it expected unemployment to rise above 6%, and UBS note the recent improvement of lead indicators of the labour market - suggests that there will be enough jobs growth ahead to hold unemployment around forecast peak of 6%
Deutsche Bank’s Boyton:
- June labor force report “mixed”
- Tthe bank’s employment tracker flags only moderate growth in employment in coming months
- So expects the unemployment rate to rate drift higher
- If so, then the labor market would be a touch weaker than what the RBAhave been expecting
- Despite this says the RBA remains some distance from contemplating another easing in monetary policy
- Hours worked rose 0.9% in Jun following on from a 2.1% rise in May (revised up from an original estimate of 1.7%)
- All up hours worked have risen 2.1% in the year to Jun. Firms may be nervous about employing more staff but they are working their existing staff harder.
- So if you look you can find something in the June Labour Force Survey to fit any current view on the Australian economy. As such, you can argue that the labour market is, at best or worst, holding ground rather than finding a stronger or weaker trend.
- In the year to Jun, total employment has lifted 100.3k or 0.9%. While this is broadly consistent with the other labour market indicators we use (various business surveys and consumer sentiment) it has not been enough to match population growth and as such, the employment to population ratio has fallen to 60.8% from 61.4% a year earlier.
- The only reason the unemployment rate has not lifted more (from 5.7% to 6.0%) is that the participation rate has declined from 65.1% to 64.7%. If the participation rate had held at around 65%, the unemployment rate would now be around 6½%.
- The forward looking indicators continue to point to an on ongoing sound if rather lacklustre labour market. As such, within the month to month volatility of the survey an average again of around 10k to 15k per month is still the most likely outcome over the next few months. This will not, however, be enough to prevent the unemployment rate from rising further without an ongoing decline in participation.
- Prior close 6.1999
- PBOC to drain 10bn yuan today via 28-day repos, but will inject a total of 50bn yuan for the week vs 55bn last week
Significant strengthening of the yuan from the PBOC the past two days.
Yuan reference rate today is the strongest since March 26
Australia – June employment report is due at 0130GMT:
- Employment Change for June: expected 12.0K, prior -4.8K
- Unemployment Rate June: expected 5.9%, prior 5.8%
- Full Time Employment Change June, prior was +22.2K
- Part Time Employment Change June, prior was -27.0K
- Participation Rate June, expected is 64.6%, prior was 64.6%
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