Market Focus: CNY Surge, Global Macro Trends, and Key Data Releases

Asia Morning Bites

CNY pushes up to 7.24. Next stop 7.30?

 

Global Macro and Markets

• Global markets:  Eclipsing other market moves on Monday, the sharp upwards shift of the CNY after China returned from public holidays last week is the obvious starting point for today’s reflection. The CNY had last traded at 7.18 on 21 June, but it gapped higher immediately on opening yesterday and kept climbing to finish at 7.24. The October 2022 peak of 7.30 is now firmly in focus, the main question for many will now be how quickly it gets there, and whether the PBoC tries to slow the ascent or add some two-way risk. So far, the PBoC seem to be pretty relaxed about the moves, which are sizeable, but orderly. The rest of Asia has been able to shrug off much of the CNY move. The TWD weakened 0.32% yesterday, moving slightly less than the CNH on the day. Other Asian FX saw small losses for the most part, but nothing major. Indeed, as we observed in a recent note, the correlations between CNY moves and other Asian FX seem to have fallen substantially recently. In G-10 currency space, there was little going on. EURUSD was almost unchanged at 1.0908. Other G-10 currencies were fairly muted yesterday. Equities didn’t deliver the increase that had been promised by futures this time yesterday, and US stocks suffered another decline. The S&P 500 fell 0.45% while the NASDAQ dropped 1.16%. Both are still up strongly year-to-date (12.74% and 27.41% respectively) so can absorb some further losses. Chinese stocks were also down. The CSI 300 fell 1.41% and the Hang Seng was down 0.51%. US Treasury yields were little changed across the curve. The 10Y yield is now 3.721%.

 

• G-7 macro:  It was a very quiet day for macro on Monday. Germany’s Ifo survey delivered another set of weak numbers. Carsten Brzeski suggested that Germany’s recovery was over before it really began in a note yesterday.

  Today we get US durable goods orders data for May, together with US house price data for April from CoreLogic. The Durable goods numbers are exceptionally choppy and most of the relevant detail will lie buried in the core orders and shipments numbers. The house price data have been firming lately, which doesn’t make Fed forecasting any easier. Still, some good news is that Bloomberg reports rents falling according to a national survey by Realtor.com.  Actually, other industry data had already been giving that message, but it is helpful to have further corroboration.  Conference Board consumer confidence as well as some regional US activity surveys complete the data calendar for the day.   

 

What to look out for: US durable goods and consumer confidence

• Japan leading index (27 June)

• Hong Kong trade balance (27 June)

• US durable goods orders, new home sales and Conference Board consumer confidence (27 June)

• Australia CPI inflation (28 June)

• Philippines bank lending (28 June)

• US MBA mortgage applications and wholesale inventories (28 June)

• Fed’s Powell speaks (28 June)

• Japan retail sales (29 June)

• Australia retail sales (29 June)

• US initial jobless claims and pending home sales (29 June)

• Fed’s Powell and Bostic speak (29 June)

• South Korea industrial production (30 June)

• Japan labour market data (30 June)

• China PMI manufacturing (30 June)

• US personal spending and Univ of Michigan sentiment (30 June)