ForexLive Asia-Pacific FX news wrap: USD/JPY lower

July 25, 2024 at 04:17AM

ING: “PBOC surprises markets with an off-schedule 20bp cut to the MLF”

Horrible images out of Jasper, Canada – fire danger in Alberta now is extreme

USD/JPY implied volatility surges to its highest since the first week of May

Japan’s Nikkei index is more than 10% down from its recent high

People’s Bank of China reduces 1 year Medium-term Lending Facility (MLF) rate to 2.3%

PBOC sets USD/ CNY central rate at 7.1321 (vs. estimate at 7.2706)

Goldman Sachs expect CTAs to dump USD7bn of stocks if market keeps falling

China Construction Bank lowers rates also

Chinese bank (one of the world’s largest banks) cuts time deposit rates

US President Biden speaking – time to ‘pass the torch’

Japan Services PPI (June) +3% y/y (expected +2.6%, prior +2.5%)

South Korean GDP contracted in Q2 – eyes on the Bank of Korea for a rate cut

BlackRock forecasts the Bank of Japan not to hike rates at the July 30 / 31 meeting

Japan’s Kanda says finance leaders discussed China’s excessive capacity

Japan finance minister Suzuki spoke from Brazil – didn’t comment on FX levels

China’s slowing economy – liquidity trap

ICYMI: Former NY Fed President Dudley says FOMC needs to cut next week, September too late

David Rosenberg says more Bank of Canada rate cuts are needed, “still too high ”

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UBS bullish commodities – maintain year-end Brent target at USD 87 – bullish gold also

VIX has closed at its highest since April 19

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Trade ideas thread – Thursday, 25 July, insightful charts, technical analysis, ideas

The
weakness on Wall Street that continued on Wednesday weighed on
regional equities here today. Despite the rate cuts from the People’s
Bank of China earlier this week Chinese equities fell. The People’s
Bank of China are keen to avoid further losses for stocks. The Bank announced another rate cut today. The Bank left the
Medium-term Lending Facility (MLF) rate unchanged last week at 2.5%,
but in a double surprise move they cut the rate today.

Surprise 1 was
an MLF today, the PBOC have been doing these regularly on the 1th of
each month. Today the Bank injected 200bn yuan for one year at a
reduced rate of 2.3%.

The second surprise was the 20bp cut, after only 10bp cuts to the repo and LPRs on Monday.

Several
major Chinese commercial banks, such as the Industrial and Commercial Bank of
China (ICBC), Agricultural Bank of China (AgBank), Bank of Canada (BOC),
and others, announced 10 – 20 bps deposit rate cuts.

Otherwise
news
and data flow was fairly light.

That
didn’t stop significant (for Asia) FX moves. AUD, NZD and CAD were
notable losers. GBP fell also but EUR has mainly tracked sideways.

USD/JPY
was slammed 150 points lower again. As I write its under 152.50. The
carry trade continues to be wound back, with deleveraging triggered
by this strengthening yen.

We got higher (wholesale) inflation data from Japan today. Service prices among businesses rose the most in over three decades, If this translates to consumer level inflation its another reason the BoJ has to tighten. The pass through won’t be evident immediately of course. The BoJ mee next week

This article was written by Eamonn Sheridan at www.forexlive.com.

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