ForexLive Asia-Pacific FX news wrap: China launches stock buyback funding

JPY verbal intervention:

• Japan govmt says closely watching speculative FX moves
• Yen intervention comments out of Japan

China:

• PBOC Governor says 7-day reverse repo rate will be lowered by 0.2%
• PBOC has officially ramped up support for the stock market, relending facility launched
• China National Bureau of Statistics (NBS) official says economic indicators positve change
• PBOC Governor provides directions for stock buybacks
• China Sept: Retail sales +3.2% y/y (expected +2.5) Industrial production +5.4% y/y (4.6)
• China Q3 GDP 4.6% y/y (expected 4.5%) 0.9% q/q (expected 1.0%)
• China September new house prices -5.7% y/y (prior -5.3%)
• PBOC sets USD/ CNY reference rate for today at 7.1274 (vs. estimate at 7.1267)
• PBOC says its necessary to increase support to the real economy

Other

• US politics – “Big Jack Smith document dump” expected Friday – Trump wanted this blocked
• Confirmation news – China banks cut fixed deposit rates by 25bp
• Japan data – September CPI Headline +2.5% y/y (vs. +2.5% expected)
• Japan CPI data due at 2330 GMT / 2230 US Eastern time
• ICYMI – NAB forecast a Reserve Bank of Australia rate cut at the first meeting of 2025
• Trump tariffs “would fall particularly heavily on states in the Midwest and South”
• UBS see plenty more European Central Bank rate cuts, Dec & 2025. Euro has cyclical support
• RBC expect a cascade of European Central Bank rate cuts for the next six months+
• TD on the European Central Bank – no major surprise. Now pessimistic on euro.
• North Korean dictator Kim Jong Un says South Korea is hostile
• Decentralized AI Summit at MIT Votes OriginTrail as the Best Decentralized AI Project
• Deutsche Bank expect faster rate cuts from the European Central Bank to come
• Downbeat comments from the IMF on China: reforms needed, ‘trouble’, ‘failure’
• US Treas Sec Yellen warns that Tump’s proposed massive tariffs would surge inflation
• Forexlive Americas FX news wrap: ECB cuts rates, US retail sales beat estimates
• Major US stock indices close mixed. S&P and NASDAQ give up gains.
• Trade ideas thread – Friday, 18 October, insightful charts, technical analysis, ideas

Let’s
get Japan and the yen out of the way first and then on to China.

Inflation
data from Japan for September kicked the session off. All three of
the main measures came in at or above the Bank of Japan 2% target,
although two of them were lower than the previous month. I
expressed the view a few times that I don’t think the data is too
important for the Bank of Japan right now, they seem intent on hiking
regardless of what the readings are. Market consensus is swinging
(has swung?) towards a December rate hike, which is looking possible (its not
locked in by any means).

The
CPI data didn’t move the yen too much. USD/JPY was ticking quietly
around 150.20. That changed with some verbal intervention from
Atsushi Mimura, Japan’s vice finance minister for international
affairs, AKA ‘top currency diplomat’. Mimura
jumped straight into forthright comments, hitting hot buttons like:

• recent
  yen moves somewhat rapid and one-sided
• excess
  volatility in FX market is undesirable

A
little later a Japanese government spokesman referred to the moves as
‘speculative’.

USD/JPY
fell away. But only a little. Back under 150.00 but not much lower
than 149.90. Its useful to remember that despite all the talk and
central bank decisions there is still a very wide policy gap between
US and Japanese rates, which tends to weigh against the JPY.

It
was a busy day from China. The details are in the points above, but
the main points:

• new
  home prices fell at the fastest rate since 2015
• China
  Q3 GDP came in at 4.6% y/y, better than expected (but do note that Q2
  was revised a little lower)
• Retail
  sales for September came in much better than expected, and industrial
  output also.

The
improvements in the September data were surprising. The stimulus
announcements began to roll out from September 24, so the month would
have been doing well even before these. That’s encouraging. So many
(me included) were disappointed by the announcements from China, but
given the data seems to be improving anyway perhaps its sufficient.
Oh, if you want to argue with me that Chinese data can be very
manipulated I don’t think I can counter you. Yeah, gotta be wary of
that.

But,
it didn’t stop there. The People’s Bank of China launched its
relending facility to help listed firms stock repurchases and
increasing shareholdings. In
addition, the Bank’s governor Pan Gongsheng flagged further rate
and RRR cuts to come.

Major Chinese banks announced deposit rate cuts, as expected.

One
last thing, and its US politics related. Given the race is so close,
and the Harris vs. Trump economic policies are quite different, its
going to be necessary to pay closer attention in the next two weeks
as we approach voting day. News crossed from ‘Politico’ a
reputable US politics site, that a ‘data dump’ is expected in
relation to Trump’s trial over his attempt to overturn his 2020
election loss. Trump wanted the information release delayed until
after the election, the judge has decided ‘no’. The documents are
said to be being released some time on Friday and may be something to
watch for. Or not, we’ll see.

Now,
having said all this, such a long wrap, major FX has not done a lot
today. Yen crosses were notable but USD/JPY has only had a 40 or so
point range. Chinese markets have been more active. Equities are up
slightly on the day so far.

This article was written by Eamonn Sheridan at www.forexlive.com.