Commodity currencies are soft today and that's in large part due to a soft Australia CPI but risks are growing towards some disappointment in the commodity market itself after China's politboro sent mixed signals on stimulus.
Officials committed to boosting stimulus measures, adopting a proactive fiscal stance and prudent monetary policy to address the nation's economic challenges. Policy changes include tax and fee reductions, local government bond issuances, and a shift in housing policy. The removal of President Xi Jinping's earlier stance that "houses are for living, not for speculation" has spurred a rally in property shares.
What the comments lacked were specifics and the market has developed something of a 'show me' attitude towards Chinese growth-boosting promises.
Officials said they plan to boost consumption in sectors like automobile, electronics, and tourism but there won't be vouchers for consumers, instead it appears there will be some incentives aimed at producers and that could go awry.
China's economy barely expanded in Q2 and has been a key source of disappointment globally this year. The IMF retained its 5.2% GDP forecast this week but others are more skeptical especially with the soft property market and low household consumption. While some measures to manage local government debt were mentioned, market participants want more concrete details and are awaiting further policy announcements in the coming weeks.
So the question is: How much do you trust Xi to deliver on growth?
