It was a subdued range session today across major FX while we await the decisions out of the US Federal Reserve’s Federal Open Market Committee.

Despite the lack of much net movement there was plenty on the news front.

From New Zealand the economic and fiscal update brought news of an expected return to government budget surplus three years quicker (in 2022/23) than was forecast in the May 2021 budget.

In the US we had the Senate pass the a US$2.5tln debt ceiling increase to make way for US President Biden’s agenda. The bill will head to the lower house where its expected to pass easily.

  • Also in the US Congress, the House passed a bill which bans imports made with forced labour in China’s Xinjiang region.
  • The White House also issued a statement saying China must be held accountable for genocide and is considering imposing harsher sanctions on China's largest chipmaker SMIC.

US-China tensions will persist for a good while to come ...

Speaking of China there was a barrage of news and developments:

  • the previously announced PBOC reserve requirement ratio cut (of 50bps) took effect today
  • the PBOC injected 500bn yuan via a one-year medium-term lending facility (MLF), note though this does not fully offset the 950bn yuan that matured today
  • Chinese financial media reported the PBOC may cut its Loan Prime Rates (these will be set on the 20th of the month). Speculation of cuts to LPRs never seem to go away, an unchanged rate on today’s MLF seems to indicate a cut next week is not likely.
  • Activity data from China for November was mixed (even poor depending on your point of view), the economy is being held back by a worsening property slump and restrictions and disruptions from COVID-19 outbreaks

The Bank of Japan added cash to the banking system for a third consecutive day in an attempt to drive interest rates lower after they crept up due to demand for funds heading towards year-end.

Stay tuned for the FOMC statement at 1900 GMT and Powell's presser to follow at 1930 GMT:

Jerome Powell