*Friday's NFP all but cements 25bps Fed cut
*China injects liquidity
*Hong Kong protests rage fire
Fed now most likely to deliver single rate cut...
Last Friday saw a couple of sensitive announcements that reinforced the market's expectation for the delivery of a 25bps rate cut on Sep-19, when The Fed next meets.
US NFPs printed soft, 130k vs 160k exp., but was bolstered by strong labour prints in which Average Hourly Earnings (AHE) and the Participation Rate grew faster than consensus. AHE m/m came in at 0.4% vs 0.3% exp., while the PR edged higher 63.2% vs 63.0% exp.
Powell spoke midway through the session delivering an upbeat message to markets who were previously torn as to whether the Fed would cut 25bps or 50bps come Sep-19. US yields ticked higher as Powell reinforced the strength of the US jobs market saying the US economy and consumer is in "good shape". The probability of a 25bps rate cut, as it stands, is now priced in at 96%.
Elsewhere, Trump's economic advisor Kudlow also stoked optimism around US-China trade talks with headlines suggesting "temperatures are calmer now in US-China trade talks" and that "Chinese deputies are coming to US in September". I'd be cautious, however, as to the substance of these comments with meaningful progress yet to be discerned.
Overall, I think positive rhetoric seen across Friday's session bodes well for lower AUDUSD and higher USDJPY at the open.
I mentioned in early Friday's Asia Morning Call
some of the measures China might take to prop up the economy and balance the negative pressures of the US-China trade complex. As an update, late in the session, we saw The PBOC officially announce a 50bps RRR cut for all banks, with a 100bps cut available for qualified city banks.
The latest injection of liquidity by the PBOC, which follows 3.6trn Yuan of easing since 2018, is estimated to see 900bn Yuan or 126bn USD equivalent released into the economy over the course of three months.
Around 800bn Yuan, or 89% of the total injection, is drawn from the broad based cut and will come into effect in the near future on September 16. The other 100bn Yuan, is expected to stem from the additional cut, and will be spread across two dates October 15th and November 15th.
Look for positive stimulus to flow through to CSI300 bullishness, equities in general and USDCNH edging higher.
Hong Kong calls on US support...
Source: ABC news
The withdrawal of the extradition bill by Carrie Lam has fallen on deaf ears with rampant violence and widespread protesting continuing throughout Hong Kong over the weekend.
US flags were noticed as people marched with anti-govermnent protesters calling on the US to intervene. Some were heard singing the US national anthem while others were quoted saying that "it's time Hong Kong saw the same US values of liberty and democracy".
Photos emerged that exhibited the entrance to MKR Central Station, a station not dissimilar in stature to Flinders, London Central or Central in New York, barricaded with cardboard boxes and lit on fire. Having been to Hong Kong many a times, seeing the juxtaposition of a violent fire and the opulence of a Bvlgari in the background, brings me to disbelief. Hong Kong really is a shadow of its former self.
The negative economic impact, as a result, sees Fitch downgrade the country for the first time since 1995 from AA+ to AA, with the economic outlook currently negative.