Free Trial
USDCAD TECHS

Pierces Key Support

AUDUSD TECHS

Corrective Cycle Extends

Real-time Actionable Insight

Get the latest on Central Bank Policy and FX & FI Markets to help inform both your strategic and tactical decision-making.

Free Access
     TOP NEWS: China will take "necessary countermeasures" as before against the
U.S. for its acceleration and escalation of tariff sanctions, the Ministry of
Commerce said on its website. The U.S. plan to add an additional 10% tariffs on
$200 billion worth of Chinese products was "completely unacceptable" and China
felt "shocked", the ministry said. 
     TOP NEWS: European companies may see profits drop as the trade war between
the world's two largest economies hits their operations, the EU Chamber of
Commerce in Beijing said. "Blunt tariff instruments affect everything," Jacob
Gunter, Policy and Communications Coordinator at the Chamber, told MNI.
     YUAN: Yuan crosses are looking bearish as the CNH comes under renewed
pressure from the escalating trade war. While USDCNH remains some way off its
July 3 peak, EURCNH is at new cyclical highs and is breaking through its
downward sloping resistance line from the August 2017 peak. The yuan looks set
to continue weakening on a trade-weighted basis as the ongoing collapse in
interest rate expectations weighs on the currency.
     LIQUIDITY: The PBOC skipped open market operations (OMO) for a third
consecutive day, stating that a relatively high level of liquidity can absorb
maturing reverse repos. That resulted in a net drain of CNY40 billion, as the
same amount of reverse repos matured today. CFETS-ICAP's money-market sentiment
index closed at 38 on Tuesday, remaining unchanged from Monday.
     MONEY MARKET RATES: Benchmark 7-day deposit repo average rose to 2.6568% on
Wednesday from 2.6451% on Tuesday; Overnight average increased to 2.3928% from
2.2953% on Tuesday: Wind Information.
     BONDS: The yield on benchmark 10-year China Government Bond was last at
3.5150%, down from the previous close of 3.5450%, according to Wind Information.
     STOCKS: Shares in Shanghai slumped after closing higher for three
consecutive days, due to the new U.S. list of proposed tariffs. Shanghai
Composite Index closed 1.76% lower at 2,777.77. Hong Kong's Hang Seng Index
declined 1.57% to 28,231.54. The 30-day correlation between USDCNY and Chinese
stocks (using the CSI 300) sits at the highest level on record at 0.9786.
Previous occurrences of the correlation approaching 1.00 have been somewhat
short-lived, with correlations edging down amid a trend change in one or both of
the assets.
     FROM THE PRESS: China is weighing countermeasures to offset the negative
shock of the new U.S. $200 billion tariff sanctions, Xinhua News Agency
reported, citing Ma Jun, a member of the PBOC monetary policy committee.
Uncertainties remain as U.S. plans a public hearing in August, Xinhua cited Ma
as saying. China is evaluating the impact of the trade war on respective
companies and industries to decide on the countermeasures, Xinhua said citing
Ma.
     The yuan has been overall stable against a basket of currencies despite
two-way fluctuations against the U.S. dollar,  Financial News said citing
economists including E Yongjian, an analyst with BOCOM. China's solid economic
fundamentals will support stable FX reserves and allow the yuan to be more
flexible, the newspaper said. The yuan has been more favored as both a payment
and reserve currency, with three consecutive quarters of increases in the
proportion of the world's forex reserve, the newspaper said citing IMF data.
     China shouldn't tighten its approach for monetary policy, China Securities
Journal reported citing Sheng Songcheng, head of the Financial Survey and
Statistics Department of the PBOC. With the marginal easing of deleveraging, the
growth of M2 this year will likely exceed 8.5%, higher than 8.1% last year, the
newspaper said citing Sheng. This year's fiscal policy has been tighter as the
deficit ratio is expected to decline by 0.4 percentage point to 2.6%, Sheng
said, according to the Daily.
     China's state-owned asset managers must shift focus on managing financial
assets from controlling the companies, Economic Information Daily said in a
commentary. China will enhance the strategic layout of state-owned financial
asset and boost the vitality of financial institutions, said the newspaper,
owned by the official Xinhua News Agency. China will deepen financial
regulations to ensure higher quality development, the newspaper said. 
--MNI Beijing Bureau; +86 (10) 8532-5998; email: sherry.qin@marketnews.com
--MNI Beijing Bureau; +86 10 8532 5998; email: william.bi@mni-news.com
[TOPICS: M$A$$$,M$Q$$$,MBQ$$$]

To read the full story

Why Subscribe to

MarketNews.com

MNI is the leading provider

of news and intelligence specifically for the Global Foreign Exchange and Fixed Income Markets, providing timely, relevant, and critical insight for market professionals and those who want to make informed investment decisions. We offer not simply news, but news analysis, linking breaking news to the effects on capital markets. Our exclusive information and intelligence moves markets.

Our credibility

for delivering mission-critical information has been built over three decades. The quality and experience of MNI's team of analysts and reporters across America, Asia and Europe truly sets us apart. Our Markets team includes former fixed-income specialists, currency traders, economists and strategists, who are able to combine expertise on macro economics, financial markets, and political risk to give a comprehensive and holistic insight on global markets.