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Asian markets declined as investors awaited key US inflation figures to assess whether the Federal Reserve will lower or maintain interest rates in the upcoming week. China’s top policymakers are currently engaged in discussions regarding the potential decision to permit the yuan to depreciate in 2025. This consideration arises in the context of the impending tariffs imposed by former President Trump, which are expected to have significant implications for trade and economic relations. According to sources familiar with the matter, the weakening of the yuan could be a strategic move to mitigate the adverse effects of these tariffs on China’s economy. The policymakers are weighing the benefits and risks associated with such a move, as a weaker yuan could enhance the competitiveness of Chinese exports but may also lead to increased tensions with the United States and other trading partners.Stocks in Hong Kong and mainland China fell on Wednesday, coinciding with the start of an annual economic conference in Beijing. Markets in Taiwan and Australia also saw declines, while South Korean stocks rose for a second consecutive session, recovering from last week’s brief period of martial law that led to political turmoil. Additionally, the two-day Central Economic Work Conference in China is expected to outline policies for the upcoming year, with markets encouraged by signs of stimulus from top officials. Economists forecast that China’s budget deficit will reach its highest level in thirty years, with interest rates expected to be reduced to their lowest since 2015. At least seven Chinese brokerages anticipate that next year’s fiscal deficit will be 4% of GDP, marking the highest level since a major tax reform in 1994. Historically, Beijing has kept its budget deficit at or below 3%.U.S. consumer prices have shown a level of consistency, with month-to-month inflation rates reverting to levels seen before the summer. This pattern is expected to continue in November, with economists predicting a year-over-year CPI of 2.6% and a core rate of 3.3%, remaining steady from the previous month. Ongoing discussions about seasonality and the rising shelter costs further reinforce this trend, although the overall momentum is notable. Markets anticipate that the Federal Reserve will take a cautious stance at next week’s rate meeting, as the FOMC still views monetary policy as restrictive, and there are few signs that inflation expectations have changed. Nevertheless, with economic growth exceeding potential and confidence improving since the election, the price outlook appears more balanced. This holds true even when considering strong productivity and data indicating that the labour market is now more stable.
Overnight Newswire Updates of Note
(Sourced from reliable financial news outlets)
FX Options Expiries For 10am New York Cut (1BLN+ represents larger expiries, more magnetic when trading within daily ATR)
CFTC Data As Of 6/12/24
Technical & Trade ViewsSP500 Bullish Above Bearish Below 6000
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