MNI China Daily Summary: Wednesday, July 3

MNI BRIEF:BOJ Q1 Output Gap Hits 16th Negative Reading In Row

MNI: PBOC Sets Yuan Parity Higher At 7.1312 Weds; -0.34% Y/Y

MNI: PBOC Net Drains CNY248 Bln Via OMO Weds; Rates Unchanged

CHINA PBOC CONDUCTS CNY2 BILLION VIA 7-DAY REVERSE REPOS WEDS

CHINA SETS YUAN CENTRAL PARITY AT 7.1312 WEDS VS 7.1291

May Trade Balance Weaker Than Expected From Gold Volatility

MNI: US MAY TRADE GAP -$75.1B VS APR -$74.5B

MNI: US JOBLESS CLAIMS +4K TO 238K IN JUN 29 WK

RPT-MNI: Canada Sticks To Fiscal Anchors, Spends Chunk Of Windfall

MNI BRIEF: Poilievre Calls QE 'Scam' And Would Limit BOC Remit

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USD Surges With Real Yields, EUR/USD Downtrend Cemented

FOREX
  • The single currency was the poorest performing currency in G10 Wednesday, sliding against all others to retain the solid downtrend in EUR/USD. The pair traded to a fresh cycle low of 1.0488, to extend the recent clearance of 1.0632.
  • It stopped just short of 1.0484, the Jan 6 low. Moves in the EUR come ahead of the September preliminary CPI estimate due on Friday, at which markets expected headline inflation to dip below 5.0% for the first time since late 2021.
  • NOK sits at the other end of the table, with the strength in oil markets remaining the primary driver. The prompt WTI crude spread rallied to its highest in over a year, lending further support to oil-tied currencies and putting the NOK at the top of the table. EURNOK is has breached the 11.40-11.60 range that has contained the pair since mid-August, meaning the 200-day EMA at 11.2735 provides the next key support (it got close today at 1.2762). The NOK bid also allows NOKSEK to retrace yesterday's downtick, with the cross rising by ~1% today.
  • The medium-term uptrend across the greenback continues to dominate (DXY +0.35% today), having hit new YtD highs as long-end Treasury yields see a real yield driven surge to fresh multi-year highs. Concerns surrounding a possible US government shutdown remain at top of mind, with equities bouncing and some retreat in the USD index after both McConnell and Schumer have indicated the Senate will work to keep the government open with the implication that the House is the stumbling block.
  • Fed's Kashkari spoke to say that near-term economic risks from a shutdown could force the Fed to "do less" on policy than might otherwise be the case, leaving markets watching politics and Capitol Hill for any further developments. Fed's Powell hosts a town hall with educators on Thursday, at which the Q&A will be watched for any comments on policy.
  • Focus Thursday turns to regional German CPI data, ahead of a national print expected to show inflation at 4.5% for the Y/Y EU harmonized release. From the US, weekly jobless claims and the tertiary read for Q2 GDP also cross along with comprehensive national account revisions.
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