13 Aug 2015
Yuan, China, US data and FOMC - RBS
FXStreet (Guatemala) - Analysts at RBS explained that the global tremors from China’s shifting FX policy have spurred positioning retrenchment and general risk-off sentiment that may continue to dominate global markets.
Key Quotes:
"While there are no formal data releases scheduled tomorrow, the PBOC is due to give a briefing on the Yuan at 10:15 local time in Beijing. The turmoil in China has shaken market confidence in the Fed’s ability or desire to hike the policy rate at their September meeting in just five weeks’ time."
"But it remains unclear how the Federal Reserve will interpret the change in FX policy in China, particularly as China maintains the firepower to limit volatility in the currency should it choose via its large FX reserve portfolio."
"While international developments, and with them financial conditions, certainly play a role in the FOMC’s calculus, we think the FOMC’s chief focus will be on the domestic economic data. One of those key data points is US retail sales, an important indicator of consumer outlook."
"Our economics team forecasts a bounce back in sales after a disappointing outright decline in June sales – earlier than usual discounting ahead of the important back-to-school shopping season may have boosted sales. As Fed President Dudley noted today it’s too early to judge the impact of China’s FX regime shift, adding that he still thinks the FOMC is getting “nearer” to rate hikes."
Key Quotes:
"While there are no formal data releases scheduled tomorrow, the PBOC is due to give a briefing on the Yuan at 10:15 local time in Beijing. The turmoil in China has shaken market confidence in the Fed’s ability or desire to hike the policy rate at their September meeting in just five weeks’ time."
"But it remains unclear how the Federal Reserve will interpret the change in FX policy in China, particularly as China maintains the firepower to limit volatility in the currency should it choose via its large FX reserve portfolio."
"While international developments, and with them financial conditions, certainly play a role in the FOMC’s calculus, we think the FOMC’s chief focus will be on the domestic economic data. One of those key data points is US retail sales, an important indicator of consumer outlook."
"Our economics team forecasts a bounce back in sales after a disappointing outright decline in June sales – earlier than usual discounting ahead of the important back-to-school shopping season may have boosted sales. As Fed President Dudley noted today it’s too early to judge the impact of China’s FX regime shift, adding that he still thinks the FOMC is getting “nearer” to rate hikes."