The People’s Bank of China announced Friday a re-introduction of reserve requirements on FX forwards trading which it had eliminated last September. Since 2015 the PBOC has used reserve requirements on FX forward transactions as a tool to control ‘macro-financial risks’. The move makes it effectively costlier for the market to fund short CNY positions through the forwards market
source: zerohedge.com
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BoJ MEETING
The Bank of Japan pledged to keep interest rates. Policy board voted 7-2 to keep its short term interest rate target at minus 0.1% and maintain its 0% target for the yield on 10-year Japanese government bonds, while allowing its long-term rates to fluctuate depending on price developments
⇒ BoJ MOVES TOWARDS MORE FLEXIBLE POLICY
US PCE
Core PCE – the Fed’s preferred measure of inflation – grew at a similar pace as in April and May, indicating that the FOMC will likely keep its post-meeting statement language that the measure has “moved close to 2 percent”
Activity decelerated in an otherwise robust quarter, consistent with the notion that the growth and personal spending results are unsustainable. Trade tensions may have held back spending on durable goods, yet spending on services rebounded – boosting the headline number. The jump in services is a testament to strong consumer spending in the latter half of 2018, and consistent with Bloomberg Economics’ view that growth will average 2.8% in the second half
⇒ JUNE SPENDING DATA POINT TO MODERATION IN 2H
US ISM MANUFACTURING
The decline in the headline ISM Manufacturing Index in July is consistent with a sector that while healthy, is poised for a second-half slowdown
The new orders subcomponent, dropping to its lowest level this year, signals slowing demand in the months ahead, in-line with the latest reading on consumer spending
The index for prices reached its lowest levels since January, which is another sign that recent price pressures may have stalled
⇒ ISM MANUFACTURING DECLINE SIGNALS 2H SLOWDOWN
FOMC
With the markets broadly anticipating a September rate increase and tilting toward a possible December hike, the Federal Reserve had little need to communicate additional guidance regarding policy at its August meeting
The economic assessment upgraded the characterization of growth to “strong” from “solid»
⇒ FED LIMBERS UP FOR SEPTEMBER AFTER AUGUST SNOOZE
source: Bloomberg
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