FX Markets Stay Calm at the Beginning of the Week

Market Reviews

The US dollar is trading in a narrow range against major currencies after a slight decline on Friday on the publication of ambiguous data on the US labor market. The Swiss franc is also steady. Australian dollar and New Zealand dollar are paring last week’s losses. Canadian dollar is trading as the weakest one. On stock markets, Hong Kong HSI fell by 0.85%, Singapore Strait Times lost 0.58%.

China’s central bank cut the amount of cash lenders must hold as reserves for the fourth time this year. The People’s Bank of China (PBOC) lowered the required reserve ratio (RRR) for some lenders by 1 percentage point, effective from October 15. The cut will release a total of 1.2 trillion yuan ($175 billion), of which 450 billion yuan is to be used to repay existing medium-term funding facilities which are maturing.

China’s service sector grew at the fastest pace in three months in September, although general sentiment deteriorated. China Caixin PMI services rose to 53.1 in September, up from 51.5 in August and beat expectation of 51.5. Caixin PMI composite rose 0.1 to 52.1, showing that overall business activity expanded modestly at the end of Q3.

Japan Prime Minister Shinzo Abe said that he would welcome UK to join the Trans-Pacific Partnership (TPP). It is a clear signal that Japan is sticking with the trade pact despite US withdrawal. This also could be used by Brexiteers to reaffirm their stance that there are more opportunities outside of the EU. On Brexit, Abe urged “that both sides can contribute their wisdom and at least avoid a so-called disorderly Brexit.” Also, he hoped that “the negative impact of Brexit to the global economy, including Japanese businesses, will be minimized.”

Data on US CPI and PPI inflation will be in focus this week. UK will release industrial and manufacturing productions on Wednesday. ECB meeting accounts will be published on Thursday. US import prices and German CPI final will be released on Friday.