Yuan Climbs to Seven-Month High as PBOC Signals Readiness for Depreciation
The Chinese yuan has risen above 7.30 against the US dollar, reaching its highest point in more than seven months amid cautious market sentiment influenced by the People's Bank of China's less optimistic stance. The central bank set its daily midpoint at 7.1291 yuan per dollar, the weakest since November 21, indicating a readiness to allow further yuan depreciation. This trend is largely attributed to a strong US dollar, supported by rising US bond yields and speculation surrounding Donald Trump's potential return to the presidency. Investors are now focused on upcoming Chinese PMI data scheduled for release tomorrow and inflation figures next week, crucial indicators for assessing the health of the world's second-largest economy.
WTI crude futures reached about $83.5 per barrel on Tuesday, hitting their highest level in over two months. This surge was driven by expectations of increased summer travel demand, with the American Automobile Association forecasting a 5.2% annual growth in holiday travel and a 4.8% rise in car travel from last year. Additionally, bets on potential Federal Reserve rate cuts were supportive, following optimism from softer US inflation data suggesting earlier monetary easing could stimulate economic activity and fuel demand. Investors are now focused on remarks from Fed Chair Jerome Powell, the release of FOMC meeting minutes, and upcoming US nonfarm payroll data for further insights into the Fed's interest rate outlook.
On Tuesday, the yield on the US 10-year Treasury note edged down to approximately 4.44%, staying close to its highest levels in a month. Recent events, including last week's debate and a Supreme Court ruling granting broad immunity to ex-presidents, have increased speculation about Donald Trump potentially serving a second term. A potential return of Trump is viewed as likely to drive inflation due to anticipated policies such as tax cuts, stricter immigration measures, and higher tariffs on imports. Federal Reserve monetary policy is expected with soft US inflation data for May and weak manufacturing figures for June. Insights from Fed Chair Jerome Powell's remarks will also be released, alongside the central bank meeting minutes later this week.
Gold held steady at around $2,330 per ounce, after a slight increase in the previous session. Traders are awaiting upcoming US economic data and Federal Reserve comments to gauge the Fed’s future interest rate decisions. Key events include Fed Chair Jerome Powell’s speech later today, the release of FOMC meeting minutes on Wednesday, and Friday’s nonfarm payrolls report. Recent data, such as the ISM manufacturing PMI shrinking for the third straight month in June and factory input prices hitting a six-month low, provided some support to gold by suggesting ongoing easing in inflation pressures. ECB President Christine Lagarde mentioned on Monday that the ECB is taking time to ensure inflation approaches 2% and indicated no urgency for rate cuts.