Against this backdrop, oil prices have risen, with Brent crude currently trading just below $68 a barrel. This has significantly strengthened the Norwegian krone, which has only been outperformed by a single currency globally (the Tanzanian shilling). On a positive note, continental GDP growth, a less volatile measure as compared to the headline one, remained robust, reaching a healthy 0.6% quarterly increase in Q2. Furthermore, Q1 data was revised upwards to an impressive 1.2%. Signs of economic recovery may be further corroborated by retail sales data due this Friday.
Following the dollar rout at the end of last week, the PBOC set the USD/CNY fixing at its lowest level in over nine months. A strong fixing may suggest that authorities are open to some appreciation against the dollar. It is, however, worth keeping in mind that the yuan has sold off in trade-weighted terms so far this year, shedding about 5%. This, in large part, reflects a more significant sell-off of the dollar against other currencies.
One of the main topics to watch is all things tariffs, but since Trump kicked the can down the road earlier this month, extending the China tariff deadline by 90 days, important news on that matter has been scarce. The latest episode in the saga is Trump's threat yesterday to levy 200% tariffs if China failed to supply the US with magnets.
Such feisty rhetoric is not out of character for the US president, and we probably should not be too attached to this statement. In the meantime, we’ll keep an eye out for economic readings, with August PMIs starting to flow in over the weekend.
