Japan finally managed to exert some influence on it's failing currency. Continual intervention has now forced USD / YEN down from 162 to below 152 on Thursday. They've spent more than USD 100 billion now defending the Yen.
And it caused carnage in markets. It's s long time since we've seen dislocations like USD / YEN and AUD / USD both going south at the same time !
And it wasn't just currencies, the following got totally smoked
Winners were small caps (Russell) and, amazingly, Bitcoin.
There was some rotation but mostly liquidations.
The Yen carry trade has been very popular so expect further drama if USD / YEN falls further.
Russia weighs risk of embracing crypto for international payments [Reuters]
Surprise rate cuts in China, both prime rates and one year policy rates. Remember Xi Jinping's unexpected visit to the PBoC earlier this year. We now have confimation that we have a new policy framework and Chinese bonds love it.
China’s 10-Year Yield Hits Record Low, Testing PBOC Patience[Bloomberg]
China Prime Rate Changes
China cuts interest rates in bid to prop up lagging economic growth [FT]
China Unexpectedly Cuts One-Year Policy Rate by Most Since 2020 [Bloomberg]
More economic bad news abounds, along with a continued bear market in real estate and Chinese stocks.
Is China now puking out some of the commodities that it had been stockpiling ?
Chinese Solar Group Urges Faster Consolidation as Glut Deepens [Bloomberg]
State-Backed Leasing Firm Mulls Alternative Plans for Yuan Bond [Bloomberg]
USD / YEN Daily
Down but not out. USD / YEN drops to strong technical support at 151.90. With the BoJ policy meeting next expect BoJ and Ministry of Finance to jawbone less bond purchases, JGBs to float higher to find market driven rates.
They won't want to waste all of the reserves they've used so now would be the time to hike rates aggressively. But they can't.
Yen extends advance as unwinding of global carry trades ramps up [Japan Times]
Exclusive: BOJ to weigh rate hike next week, detail plan to halve bond buying [Reuters]
BOJ Is Said to See Weak Consumer Spending Complicating Rate Call [Bloomberg]
One of the casualties was their own stock market
Nikkei 225 Daily
Yellen suggests Japan's yen intervention differs from typical manipulation[Nikkei]
LDP heavyweight Toshimitsu Motegi calls for clearer sign from BOJ on policy [The Japan Times]
FED meeting this week. Markets have priced in a rate cut. Even well-known hawks are playing the game.
I Changed My Mind. The Fed Needs to Cut Rates Now.[Bloomberg]
US M2 Money Supply YoY
Real Estate is flashing red signals
US Existing Home Sales June 2024
US New Home Sales June 2024
Housing is now a big talking point in US markets and this week's Exisiting Home Sales and New Home Sales reports confirm this.
Mortgage rates are now the lowest for a year at 6.8%, but there has been no response from would-be buyers. Home builders now have 102,000 completed, unsold homes sitting on their building lots. This is the highest level since 2009.
US GDP Q2 2024 Revision
A surprisingly higher than expected third revision of GDP masked a massive drop in durable goods orders.
US PCE June 2024
Markets were fixated on PCE data Friday which were higher than expected and has really hit a hard bottom at 2.5%.
Don't worry, Powell can just raise the inflation target and cut rates anyway.
Half of large U.S. banks are failing on operational risk, secret report finds [Fortune]
Hackers Leak Documents From Pentagon IT Services Provider Leidos [Bloomberg]
|
Office pain now spreading to multifamily and units.
On a more optimistic note, we've been seeing some of the money on the sidelines picking up distressed properties.
Trump says Bitcoin is going to the moon, will hold it as a strategic reserve asset
Bank of Canada cuts by 25bps.
With implications for the currency
USD / CAD Daily
The press release was hardly supported by lower than expected New Housing Price Index and much higher than expected Average Weekly Earnings.Canada New Housing Price Index June 2024
Canada Average Weekly Earnings (YoY) May 2024
BoC's Macklem reveals reasons behind liquidity issues[CMP]
Macklem Cites Bond Demand as Source of Canada Repo Stress [Bloomberg]
Trudeau’s Tax Hikes Risk Worsening Canada’s Struggle for Capital [Bloomberg]
England and Wales record second-highest company insolvencies since 2009 [Reuters]
Retail sales and CPI next week with the RBA meeting on August 6
Bank of Japan, FED and Old Lady next week will keep investors on their toes.
Add nonfarm payroll
Add US election shenanigans
What can go wrong?
