Goldman Sachs - PBOC Q2 monetary policy report opens door to lower yuan

The April - June monetary report from the People's Bank of China was published Friday.

GS note, in their 'bottom line' for the report:

• PBOC suggested that the accommodative monetary policy stance would likely continue
• report also echoed the statement from Julys Politburo meeting in many ways (including de-emphasizing "structural deleveraging"). which in our view sent a slight dovish bias
• we think the PBOC opened the door for further RMB depreciation should export and overall economic growth weaken more in light of higher tariffs and ongoing trade tensions with the US

And:

• we still expect the PBOC to be very cautious managing the pace of depreciation to guide market expectation and avoid the nsk of triggering large capital outflows

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That very cautious managing the pace of depreciation certainly fits with what we saw from the PBOC last week, they are using the counter-cyclical factors to slow the deprecation, slower than expectations.