In the minutes of September meeting, RBA said the board agreed to “maintain highly accommodative settings as long as required”. A surprised addition in the language is that the central bank will “continue to consider how further monetary measures could support the recovery”. While it’s still early, the minutes indicated that RBA would be ready to ease further if circumstances warrant so.
Other than that, the minutes continued little new. The pandemic economic downturn “had not been as severe as earlier expected”/. Recovery, however, was “likely to be uneven”, with the outbreak in Victoria having a major effect. Uncertainty was “continuing to affect the spending plans of many households and businesses”. Wage and price pressures “remained subdued” and this was “likely to continue for some time”.
China data beat expectations, USD/CNH breaks key fibonacci support
August economic data released from China today were generally better than expected. Industrial production continued its bounce and rose 5.6% yoy versus expectation of 5.1% yoy. That’s also the fastest rise in eight months. Retail sales rose 0.5% yoy versus expectation of 0.0% yoy. Sales were finally growth after a seven-month downturn. Fixed asset investment dropped -0.3% ytd yoy, above expectation of -0.5% ytd yoy.
Yuan’s exchange rate appreciated on optimism that China’s economy is now on firm footing for further bounce back for the rest of the year. USD/CNH resumed the fall from 7.1961 and hits as low as 6.7825 so far. Outlook will stay bearish as long as 6.8600 resistance holds. The firm break of 38.2% retracement of 6.2354 to 7.9153 at 6.8286 now argues that whole rise from 6.2354 has completed already. Deeper fall would be seen to 61.8% retracement at 6.6021. Though, the reaction from Chinese stocks is so far mild. We’re prefer to see the SSE (now at around 3288) to break through the key resistance zone of 3500 to further confirm the underlying strength in sentiments.