Gold Price Forecast: Potential Rise Ahead?

Gold has approached the supporting level of 1760 and the broken downtrend from the Elder timeframe, which is denoted by the blue line on the chart below. Currently, the price of gold is trying to pull from the abovementioned trendlines, targeting the level of 1880. So, let’s observe what is going to happen next.The currency pair EUR/USD remains in the supporting zone formed between the levels 0.9950 and 1.0000. This asset is likely to undergo a correction and jump.Oil is moving in the range. Now, the price of oil got back under the level of 100. The asset’s price is targeting the resistance at the level of 107.50 away from which it might potentially drop.

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Three cryptocurrency funds for the adventurous investor

The crypto sector is extremely risky, but these three cryptocurrency funds may appeal to adventurous investors who anticipate a rebound, says David Stevenson.

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The fast-growing success of Britain’s wine industry

Hotter summers are great for the nation’s winemakers, says Chris Carter. But land for vineyards is selling at a premium – expect to pay up to £25,000 an acre for the best spots.

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How your business can help its staff through the cost-of-living crisis

There are several ways companies can alleviate the cost-of-living crisis for their employees, says David Prosser. Here are a few to consider.

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Platinum FUTURES (PL1!), H4 Potential For Bearish Drop

Type: Bearish DropKey Levels:Resistance: 883.8Pivot: 858.9Support: 833.2Preferred Case:On the H4, with price going within the descending trendline and moving below the ichimoku indicator, we have a bearish bias that price will drop to the pivot at 858.9 where the overlap support is. Once there is downside confirmation that price has broken pivot structure, we would expect bearish momentum to carry price to 1st support at 833.2 where the swing low is.Alternative Scenario:Alternatively, price could rise to 1st resistance at 883.8 where the overlap resistance, 23.6% fibonacci retracement areFundamentals:China recently announced the YoY industrial activity figures for July, falling to 3.8% from 3.9% in June, which is quite disappointing. Specifically related to mining, industrial activity in China dropped from 8.7% in June to 8.1% in July, which further dampened platinum prices.

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Market Spotlight: GBPJPY Triangle On Watch

GBPJPY on WatchPrice action in GBJPY is lookinginteresting here. The pair has been grinding higher this year within a broadbullish channel. The rally has recently stalled into the 168.39 level, however,with price pulling back as deep as the 160 region. However, this area has actedas strong support for pair and, with the bull channel still intact, price nowlooks to be sitting in a consolidation pattern (triangle), suggesting room fora fresh topside break in the near term. Bulls can look for a break above 163.18targeting a move back up to the year’s highs around 168.39. The risk, ofcourse, is that we break lower from the current pattern, in which case I willreassess.Keep An Eye OnThe current risk-off tone toglobal markets is favouring JPY currently via enhanced safe-haven demand.However, should this dynamic reverse at any point, we can expect the pair torally. Additionally, the September BOE meeting is widely expected to see thebank announce further tightening measures to counteract record high inflationin the UK last month. With the BOJ firmly committed to maintaining its easingstance, this creates plenty of policy divergence to help drive GBPJPY highsagain.

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Global Shares Sink Following Shocking PMI Results

Global Shares In Free-FallThe MSCI world shares index fund, which tracks a basket of the top global equities indices, is approaching a very key level. It’s been a turbulent year for the index. Following the heavy losses which marred the start of the year, the index has since rallied more than 35% off the lows, retracing around 70% of the year’s losses. However, in recent weeks, this rally has stalled and the index is now reversing lower once again. If you haven’t heard of the index fund before, it’s a very useful tool for keep an eye on the health of the global. Given that it is essentially an index of all the top indices across the globe, the fund offers an immediate insight into whether global economic sentiment is trending higher or lower and can therefore be a very useful barometer when seeking to position yourself across the markets, aligning with risk flows.Support From "Fed-Pivot" FadingThe index had been rallying recently on the growing view that the Fed was likely to pivot away from the aggressive tightening we’ve seen over recent months. Taking the view that inflation is moderating and with fears over growth mounting, traders began scaling back Fed rate hike pricing, fuelling a rebound in stock prices. However, in more recent weeks, this view has faded as the Fed itself pushed back against the idea of a slowdown in tightening.Fed Tightening Back In FocusThe July FOMC minutes saw the Fed reaffirming its commitment to pushing on with tightening. While the bank acknowledged the risks of tightening too much, it cited its main priority as the need to tame excessive inflation. Following the minutes, a group of Fed members were then seen echoing these sentiments, voicing their support for further tightening, including a larger .75% hike in September.Global Recession Fears MountingAdditionally, fears of a global recession are taking centre stage once again. Weak Q2 data out of the US and Eurozone have put the focus back on growth recently. This week, the latest round of PMI data out of the US, UK and Eurozone saw many of the readings sinking further into negative territory, highlighting concerns for the outlook as we run down the year. With inflation still elevated, and in places rising, and rates continuing to tighten, many central bankers have warned of a slowdown into year-end.Technical ViewsMSCIFollowing the breakout above the bear channel from YTD highs, MSCI has since been grinding higher within a clear bullish channel over the recovery from summer lows. Since stalling into the 518.10 level, however, price is now retracing lower and is fast approaching a key technical area. The 452.09 level holds structural support as well as the retest of the bull channel low and broken bear channel high. This is a key area which, if held, should keep the medium – longer-term view bullish.A break below, however, opens the way for a decline towards 382.89.

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Investment Bank Outlook 24-08-2022

BNY MellonKRW: Balancing Growth & InflationSouth Korea's economic recovery so far this year has been mixed. While better-than-consensus GDP in Q2, 0.7% q/q and 2.9% y/y, showed signs of improvement, data from other segments has been less encouraging. For example, the July PMI manufacturing index, at 49.8, unexpectedly fell into contraction zone for the first time since September 2020, and manufacturers' August Business Survey fell to 83 (March high: 93).Exports growth has fallen markedly from the 45.5% y/y highs in 2021 and 21.1% y/y in February this year. While July exports grew at a respectable 9.2% y/y, semiconductor exports plunged to just 2.1% y/y. Perhaps even more concerning was exports to China, Korea's largest trading partner, dropping 2.7% y/y.Consumer confidence dropped to 88.8 in August. The sub-index of future economic conditions painted a dire outlook: at 58, below the 59 in April 2020 and back to 2008 levels. Overall, weakening confidence along with ongoing inflation suggest the possibility of a limited consumption recovery and, hence, does not bode well for growth.As for inflation, the risk of de-anchoring remains a top concern for the Bank of Korea (BoK). CPI in July reached 6.3% y/y, the highest since November 1998. Inflation expectations per the BoK's survey hit 4.7%, and all-time high in the series (began in 2002).INGAmid an abundance of rather dismal PMIs in major Western economies, the dollar suffered a correction yesterday as activity surveys showed a big slump in the service sector. The market reaction relates to markets pricing in a grimmer economic outlook in Europe than in the US, so that bad data tends to have an asymmetrically larger impact on US-growth-sensitive assets. In FX, the dollar’s overbought condition makes it naturally vulnerable to some position-squaring downside risks.That said, we are not surprised to see the post-PMI FX moves being quite short-lived (the dollar recovered overnight), as the macro picture and solidly hawkish expectations ahead of Jackson Hole should keep the dollar broadly in demand. The quintessential lack of attractive alternatives – especially in Europe – means that DXY can still reach 110.00 by the end of the week if Fed Chair Jerome Powell sounds convincing enough in sticking to his hawkish message on Friday.On the data side today, some focus will be on durable goods orders for July, which should however have limited market implications. There are no scheduled Fed speakers before the Jackson Hole Symposium kicks off tomorrow.

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Daily Market Outlook, August 24, 2022

Daily Market Outlook, August 24, 2022 Overnight Headlines World At Rising Risk Of Recession As Inflation Hits Consumers Goldman Sees Powell Sticking To July Tightening Message At JH US Dollar Pauses For Breath Wednesday Ahead Of Jackson Hole Bitcoin Weakened After Slipping Back Beneath 21,500 Level Fed's Kashkari: His Biggest Fear Is Inflation Will Be More Persistent Panetta:Must Be Prudent With Rates Hikes As Recession Risk Rises Australia’s Slumping Property Market Raises Risk Of A Recession Oil Prices Fall As Fears Of Imminent OPEC+ Output Cut Recede Citi Says Russian Oil Faces ‘Crossroads’ As EU Curbs Erode Flows U.S. Yields Hit Multi-Week Highs As Market Expects Hawkish Powell UK Money Markets Believe Interest Rate Will Hit 4% By March China’s Shenzhen Stocks Leads Losses In Mixed Asia Trade S&P 500 Seen A Little Higher By End Of 2022 - RTRS PollThe Day Ahead Asian equities are mostly down overnight as economic uncertainty continues to rattle markets. Oil prices are close to their highest since early August with Brent crude currently near $100bbl. Natural gas prices are down modestly from this week’s high engendered by Russia’s announcement of a three-day shutdown of supplies through the Nord Stream pipeline. Reports say that a senior energy executive has presented a plan to the UK government to cap energy prices for two years at a cost of £100bn. That would be considerably more than the cost of the Covid furlough scheme. Ofgem plans to announce its new energy price cap on Friday. Today’s data calendar is very quiet with nothing of note in the UK or the Eurozone. In the US, durable goods orders and pending home sales for July will provide indications of the strength of the factory and housing sectors. Recent indicators on the US economy have been mixed but manufacturing output data for July showed a monthly rise of 0.7%. That did follow two consecutive monthly declines, but output had previously risen sharply in the first few months of 2022 and the level of factory activity is still more than 3% higher than at the same point a year ago belying indications from GDP data that the economy is already in recession. The ongoing resilience of factory output reflects the continued growth in orders. Overall durable goods rose by 2% in June and have risen in all but one of the first six months of the year and, even excluding the volatile transport sector orders, have continued to rise. Unofficial surveys suggest that orders are slowing but we expect another rise in orders for July consistent with manufacturing activity continuing to rise for now. In contrast, US pending home sales for July are expected to fall, which would be the eighth time out of the last nine months. Given that other indicators of both housing sales and construction are posting a similar message, it seems clear that this sector is being significantly impacted by the ongoing rise in US interest rates. This mixed picture highlights the dilemma that the US Federal Reserve faces in setting monetary policy. So far it continues to signal that it is too early to call a halt to interest rate rises. Markets will be looking to see whether Fed Chair Powell maintains that line in Friday’s key speech.FX Options Expiring 10am New York Cut EUR/USD: 0.9840-50 (621M), 0.9920-25 (812M), 0.9935 (232M) 0.9950 (771M), 0.9990-00 (377M), 1.0050 (249M) USD/JPY: 136.00-05 (955M), 136.30-35 (300M) 136.80-90 (1.1BLN), 137.00-05 (360M), 137.20 (320M) EUR/JPY: 136.00 (201M), 137.00 (278M) AUD/USD: 0.6975 (341M). NZD/USD: 0.6250 (274M)Technical & Trade ViewsEURUSD Bias: Bearish below 1.0250 Soft early as negative factors continue to build +0.05% after closing up 0.25%, as recent USD strength saw a correction EZ PMI's showed that the economy has stalled as the cost of living soars Tough ECB call; drought adds to EU economic woes Disparate EU-US economy, central bank response will continue to cap EUR/USD Tuesday's 0.9900 low is initial support, then 2002 congestion around 0.9700 Close above 1.0163 21 needed to end downside bias More than €2bn of 0.9850 put strikes due this Friday Monthly and weekly projected range support sited at 9830/50 20 Day VWAP bearish, 5 Day bearishGBPUSD Bias: Bearish below 1.2130 Bounce relieves oversold signals – trend is lower -0.05% after closing up 0.57%, as the U.S. dollar corrected broadly lower Sterling's strength was USD led, as UK PMI's caused concern Early London 1.1716 base and 1.1876 NY high are initial support/resistance Longer term target for the downtrend is the 1.1413 March 2020 base 20 day VWAP bands expand - strong bearish trending setup Close below 1.1761/43 July and Monday's low to target 1.1413 March 2020 base 20 Day VWAP is bearish, 5 Day bearishUSDJPY Bias: Bullish above 136 USD/JPY off from 137.70 in Asia to 135.82 in New York yesterday Some bounce since, Asia 136.64-84 EBS so far, quiet Weak US data, lower US yields to blame? But bounces seen since Tsy 2s 3.350% to 3.232% to 3.325%, 10s 3.078% to 2.983% to 3.067% Plenty option expiries in area today to help contain action 136.00-15 total $1.1 bln, 136.80-137.05 total $1.6 bln Smattering in between, below and above also Japanese importers and retail will be looking to buy the dips, likely close to 135.60 Dealers expect more chop ahead of more US data, Fed Jackson Hold meet 20 Day VWAP is bullish, 5 Day bullishAUDUSD Bias: Bearish below .71 Opens higher as USD eases and commodities firm AUD/USD opens +0.73% after USD eased across the board by the end of the day Solid gains in key commodities gave AUD and CAD an extra boost AUD/USD support @ 61.8 of 0.6682/0.7146 @ 0.6855 validated by another test Resistance is at 0.6970/80 Volatile equities and global growth concerns should limit AUD/USD gains A break below 0.6850 would open the way to the trend low at 0.6682 20 Day VWAP is bearish, 5 Day bearishBTCUSD Bias: Bearish below 25.3K BTC testing pivotal 21k USD slightly higher after weak global PMI data hints at falling growth Higher Fed rate view no boon for cryptos; J-Hole summit Aug 25-27 in focus BTC supported by lower VWAP (20.9k) for now, then Jul 13 low 18.9k Res Aug 21 high 21.8k, 22.1k, 23k's 50% Fib of 25.2-20.7k Aug 28's 22.2k may pull BTC higher BTCXAU drifting slightly lower hints BTC losing recent slight haven allure 20 Day VWAP is bearish, 5 Day bearish

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Market Update – August 24 – USD Holds at highs, Stocks Slip, Oil Rallies

• USDIndex – volatile day – new 20-yr highs at 109.20 declined to 108.00 after weak PMI & Housing Data before Kashkari “biggest fear is inflation will be more persistent”.
• EUR – Weighed by weak PMI & Energy Crisis and 3 day shutdown of Nord stream 1, 3rd day under Parity (1.000) at 0.9940.
• JPY holds between 137.00 & 136.00
• GBP Also weighed by weak PMI data, energy crisis, weak government & widening strike action.Trades at 1.1800
• Stocks US stocks flat into close. (S&P500 -9.26pts (-0.22%) 4128) – Biggest movers – Oil stocks +4-6%, TWTR -7.32%. 
• Oil continued to rally, moved +4% Tuesday to $94.00 following Saudi “CUTTING production” comments.
• Gold – support at $1736 trades at $1745
• BTC – ranging between 21k & 21.5K.

Overnight – Asian equity markets fell for an eighth straight day.

Today – US Durable Goods

Biggest FX Mover @ (06:30 GMT) AUDJPY (-0.45%). Rejected 94.80 again yesterday and trades under 94.40 now. MAs aligning lower,  MACD histogram negative & signal line falling, RSI 40.36 & falling, H1 ATR 0.153, Daily ATR 0.96.

 

Click here to access our Economic Calendar

Stuart Cowell

Head Market Analyst

Disclaimer: This material is provided as a general marketing communication for information purposes only and does not constitute an independent investment research. Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of buying or selling of any financial instrument. All information provided is gathered from reputable sources and any information containing an indication of past performance is not a guarantee or reliable indicator of future performance. Users acknowledge that any investment in Leveraged Products is characterized by a certain degree of uncertainty and that any investment of this nature involves a high level of risk for which the users are solely responsible and liable. We assume no liability for any loss arising from any investment made based on the information provided in this communication. This communication must not be reproduced or further distributed without our prior written permission.

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US30, H4 | Potential Bearish Drop

Type: Bearish BreakoutKey Levels:Resistance: 33470.97Pivot: 32599.28Support: 31879.57Preferred Case:On the H4, with price breaking out of the ascending channel and moving below the ichimoku indicator, we have a bearish bias that price will drop to pivot at 32599.28 where the pullback support and 38.2% fibonacci retracement are. Once there is downside confirmation of price breaking pivot structure, we would expect bearish momentum to carry price to 1st support at 31879.57 where the pullback support, 61.8% fibonacci retracement and 127.2% fibonacci extension are.Alternative Scenario:Alternatively, price could rise to 1st resistance at 33470.97 where the pullback resistance is.

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The IndeX Files 23-08-2022

USD Rally Prompts Equities Sell-OffIt’s been a heavy start to the week for global equities benchmarks, with the four indices tracked here each being well-sold yesterday. We’re a little bit of stability in places today, though the overall tone remains heavy. The main factor weighing on risk assets this week is the resurgent strength in the US Dollar. On the back of some better data last week, a hawkish set of FOMC minutes and some hawkish commentary from Fed members late in the week, USD bulls have lit a fire under the market.With traders moving away from the idea of a Fed-pivot and re-focusing their expectations on continued tightening, stock markets have come back under pressure. Additionally, away from the US, inflation in the eurozone and UK is now expected to stay higher for longer, according to forecasts made by some investment banks this week. With this in mind, central bank tightening expectations look likely to continue to keep equities prices anchored lower near-term.Looking ahead today, the main focus for equities traders will be the release of the latest set of PMI readings from the US, UK and Eurozone. These readings will give a fresh glimpse into the recent economic performance in these economies and might well drive equities prices further lower if weakness is seen.Technical ViewsDAXThe latest test of the longer-term bear trend line has seen the DAX reversing below the rising trend line from YTD lows. Price is stalling just ahead of support at the 13067.45 level though, with both MACD and RSI turned lower the market is vulnerable to a break below unless bulls can get back above 13672.31 near-term.S&P 500The latest test of the bear trend line and 4305 level has seen the S&P strongly rejected. Price is now retesting the broken bull channel and support at the 4153.50 level and is holding for now. With momentum studies turned lower however, focus is on a break lower towards the 3910 level next if we don’t hold here.FTSEFollowing the laboured grind up to the 7558.7 level, the FTSE has since stalled and is correcting slightly lower. However, the move remain shallow for now and price action looks skewed towards another push higher unless we see the market back below the 7362.6 level near-term. To the topside, a break above 7558.7 will open the way for a test of 7691.6 above.NIKKEIThe breakout above the 28356.6 level has seen the initial move stall with price now coming back to retest the level. While this area holds as support, the focus is on a continuation higher towards the 29564.9 level next. To the downside, should we slip below, 27422.9 is the next support to note.

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Earnings Season: NVIDIA Corp.

Nvidia Corp. is a multinational giant and world leader in the development of visual technologies such as GPU graphics cards and integrated circuit technologies for computers and a video game specialist, with a capitalization of 446.23B. Nvidia is scheduled to report fiscal quarter-end July 2022 earnings results this Wednesday, August 24, after the market close.

NVIDIA Price & EPS Surprise Source: https://www.zacks.com/stock/chart/NVDA/price-eps-surprise

The company and the semiconductor market have had headwinds this year with the company’s shares down -42.1%, well underperforming the broader market, the USA500, at -11.0%.

NVIDIA EPS STORY Source: https://www.nasdaq.com/market-activity/stocks/nvda/earnings

Zacks positions NVIDIA Rank #4 (Sell) in the Top 29% (#74/252) of the Semiconductor-General industry. EPS of $0.59 is expected for this report (although for Nasdaq it is $0.36) with -13.18% ESP, which would be a growth of -43.27% y/y compared to $0.89 in the same quarter last year. A Revenue of $6.70B is expected. The company has a P/E ratio of 44.53 and a PEG ratio of 3.41. The estimate has had 0 upward revisions and 8 downward revisions in the last 60 days. The company has exceeded expectations 18 times out of the last 19 reports.

In the last quarter the company announced an EPS of 1.18 and earnings of $8.29B (+46.41%.)

NVIDIA EPS STORY Source: https://www.nasdaq.com/market-activity/stocks/nvda/earnings

La gerencia anunció que espera resultados decepcionantes para este trimestre fiscal. Haciendo mayormente responsable al sector de juegos, mencionando que habría disminuido un -44% t/t | -33% a/a a $2,040M gracias a la disminución en la demanda de chips y cambio a exceso de oferta por parte del invierno criptográfico. Los ingresos por centro de datos podrían llegar a los 3.810M lo que sería un aumento del 61% a/a, el sector automotriz a 220M un aumento de 45% a/a. En abril de 2022, las ventas globales de semiconductores llegaron a 50.920M.

Management announced that it expects disappointing results for this fiscal quarter, mostly due to losses in the gaming sector, mentioning that it would have decreased by -44% QoQ (-33% YoY) to $2.04B thanks to decreased chip demand. Data center revenues could reach 3,810M, which would be an increase of 61% YoY, and the automotive sector to 220M, an increase of 45% YoY. In April 2022, global semiconductor sales reached 50.92 billion.

“Our projections for direct sales of gaming products decreased significantly as the quarter progressed. As we expect macroeconomic conditions affecting direct sales to continue, we have taken steps with our gaming partners to adjust channel pricing and inventory.”

– Jensen Huang, Founder and CEO

In its fiscal year 2022, gaming revenue rose to $12.46 billion (last quarter to $3.42 billion), data centers to $10.6 billion (last quarter to $3.26 billion), computing and networking rose to $11.05 billion and the graphics business segment to $15.87 billion . Its global assets were at $44.19 billion and net income at $9.75 billion vs. $4.33 billion last year mainly from Taiwan, with operating income at $10.04 billion , according to Statista.

The headwinds for the company are not only on these figures; since the macro environment is not good at a global level, a general low performance is expected, as other companies in the sector have reported, because they have been equally affected by issues such as the problems in the supply chain, the closures in various parts of China as a continuation of the pandemic, and the change in consumer spending focusing on basic things of life thanks to the increase in inflation due to the Russian-Ukrainian war. This is expected to continue for the next quarter.

Technical Analysis – Nvidia D1– $170.27

After the 4-1 stock split of #NVIDIA stocks, its share price rallied to highs at 346.06 followed though by a bearish channel to a psychological support at 140.00 by July. By the end of July it recovered to 192.69 highs retesting the 100-day SMA prior to settling back to month lows and 50-day SMA at 169.24. If the asset breaks this level it could attract further selling pressure up to the 140-150 support zone, and in the case of breaking lower it would fall to the support range at 120-133 lows of 2018.

On the flipside, resistance holds at the 20- and 100-day SMA and the psychological level at 200. If the bearish channel is broken to the upside, further bullish bias could breach Q1 support at 213 and the area between the 200-day EMA and 61.8% Fib. level from the March downleg, at the 229-238 area. In the meantime ADX is at 24.80, -DI cross at 28.70 above +DI at 20.18. Possible downtrend resumption.

#NVIDIA D1

Click here to access our Economic Calendar

Aldo Zapien

Market Analyst

Disclaimer: This material is provided as a general marketing communication for information purposes only and does not constitute an independent investment research. Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of buying or selling of any financial instrument. All information provided is gathered from reputable sources and any information containing an indication of past performance is not a guarantee or reliable indicator of future performance. Users acknowledge that any investment in Leveraged Products is characterized by a certain degree of uncertainty and that any investment of this nature involves a high level of risk for which the users are solely responsible and liable. We assume no liability for any loss arising from any investment made based on the information provided in this communication. This communication must not be reproduced or further distributed without our prior written permission.

Sources:

1. https://www.zacks.com/stock/quote/NVDA
2. https://www.zacks.com/stock/news/1970029/nvidia-nvda-to-report-q2-earnings-whats-in-the-cards?art_rec=quote-stock_overview-zacks_news-ID04-txt-1970029
3. https://www.nasdaq.com/es/market-activity/stocks/nvda/earnings
4. https://www.nasdaq.com/press-release/nvidia-gtc-to-feature-ceo-jensen-huang-keynote-announcing-new-ai-and-metaverse
5. https://www.barrons.com/articles/nvidia-demand-neutral-rating-analyst-51661183315?siteid=yhoof2
6. https://www.statista.com/statistics/1120484/nvidia-quarterly-revenue-by-specialized-market/
7. https://www.statista.com/topics/7123/nvidia/#topicHeader__wrapper

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Investment Bank Outlook 23-08-2022

BNY MellonPrice Relief From China's SlowdownPolicy expectations have recovered over the past month as inflation risk globally is showing little sign of easing. FOMC expectations remain the marginal driver of financial conditions, but Europe on balance is facing far greater stagflation risk, in our view. In this backdrop, there were still two central banks which cut rates last week, in China and in Turkey, with both citing risks to growth. While that is true for both countries, inflation in the former is running at low single-digits, and at high double-digits in the latter. In any other circumstance, China’s growth struggles would be problematic for the world economy, but presently it is offering a much-needed inflation respite, transmitted through various channels. Last Friday’s move in USDCNY reflects the re-widening of interest-rate differentials, driven by highly divergent growth conditions. Normally a weaker CNY would be driving risk-aversion throughout Asia and commodity-exposed currencies for fear of destabilising capital flows. China has been generating stable exports, but domestic demand is weak. While iFlow and other data indicate that outflows from the financial account have eased, there shouldn’t be any concern over balance of payments or any capital-flight induced volatility. However, these exchange rate moves on the margins can further help reduce China’s export prices and contribute to global disinflation.China would likely want to generate some upside price impulse in the meantime to lower real rates as a form of domestic stimulus. Consequently, if we see ongoing softness in the renminbi, on balance the aggregate effects globally should be seen as positive. However, in no way should material renminbi depreciation be encouraged to this effect, as that creates new issues for China as capital outflows tighten domestic financial conditions. We think it only optimal that USDCNY continues to move in a manner consistent with interest-rate differentials. Current Fed pricing is still conservative, but we don't see much scope for a sharp move above 4.0% for terminal pricing. As such, barring very deep cuts in PBoC rates, further USDCNY upside need not prove destabilising.Higher import prices for China will have a demand drag, and we expect the impact to be further felt in commodity markets. It is often difficult to prove the counterfactual, but if China had engaged in a strong credit-fuelled investment drive along the lines of 2009, the demand lift would only amplify the price effect currently generated by supply constraints. The chart below shows the annualised change in the six-month average volume of key commodity imports for China. Demand for both coal and crude oil is contracting. Cooper demand is stable but not matching pre-pandemic levels, either. The transmission to global inflation through coal and copper is less impactful to global price-push compared to crude oil, but China’s weak demand is clearly having a disinflationary effect on key commodity prices.

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