28 Apr 2014
Asia EM Express: China's Politburo says monetary policy to remain on hold for now
FXStreet (Łódź) - Following the meeting on economic issues held by China Communist Party's Politburo on Friday, a statement was published suggesting that the current monetary policy stance should be left unchanged for now but that there were difficulties ahead which should be properly addressed. The Politburo called for boosting investment in such areas as tourism, health car, professional education and pledged to carry out reforms in taxes, prices and the financial sector.
According to Zhiwei Zhang from Nomura in China” a gradual policy easing has started, and we expect it to pick up speed in the next several months when growth slows due to weakness in the property sector.”
“GDP growth is likely to drop to 7.1% y-o-y in Q2 from 7.4% in Q1. We continue to expect a cut in the reserve requirement ratio by 50bp in Q2 and another cut in Q3. More measures to stimulate service sector investment may come soon as well.”
Economic data
Thai annual Industrial Production, released on Sunday by the Office of Industrial Economics plunged 10.4% in March, down from the 4.4% decrease in February and below forecasts of a 8.2% fall.
“Weak IP is a precursor to weak trade data for March,” Prakash Sakpal from ING suggests, adding that “We reiterate our forecast of one more BOT policy interest rate cut this year to 1.75% and our 3.40% yearend forecast for the 10-year government bond yield.”
On Friday the Reserve Bank of India informed that the country's FX reserves decreased to USD 309.41B in the week ending April 18, from USD 309.44B recorded the previous week.
Technicals
On Monday the PBoC fixed its midpoint higher for the fourth consecutive trading day at 6.1565, up 0.02% from Friday, which resulted in a rebound in the yuan. The USD/CNY was down by 0.08% at 6.2484.
On Friday the daily FXStreet Trend Index was slightly bullish, with the OB/OS Index extremely overbought. RSI sat at 77 at the last close, and has fallen to 41 so far today. Daily 2-StDev Volatility Bandwidth was expanding at 146 pips, with ATR (14) expanding at 104 pips. The 1D 200 SMA was at 6.1149, while the 1D 20 EMA was at 6.2204.
According to Zhiwei Zhang from Nomura in China” a gradual policy easing has started, and we expect it to pick up speed in the next several months when growth slows due to weakness in the property sector.”
“GDP growth is likely to drop to 7.1% y-o-y in Q2 from 7.4% in Q1. We continue to expect a cut in the reserve requirement ratio by 50bp in Q2 and another cut in Q3. More measures to stimulate service sector investment may come soon as well.”
Economic data
Thai annual Industrial Production, released on Sunday by the Office of Industrial Economics plunged 10.4% in March, down from the 4.4% decrease in February and below forecasts of a 8.2% fall.
“Weak IP is a precursor to weak trade data for March,” Prakash Sakpal from ING suggests, adding that “We reiterate our forecast of one more BOT policy interest rate cut this year to 1.75% and our 3.40% yearend forecast for the 10-year government bond yield.”
On Friday the Reserve Bank of India informed that the country's FX reserves decreased to USD 309.41B in the week ending April 18, from USD 309.44B recorded the previous week.
Technicals
On Monday the PBoC fixed its midpoint higher for the fourth consecutive trading day at 6.1565, up 0.02% from Friday, which resulted in a rebound in the yuan. The USD/CNY was down by 0.08% at 6.2484.
On Friday the daily FXStreet Trend Index was slightly bullish, with the OB/OS Index extremely overbought. RSI sat at 77 at the last close, and has fallen to 41 so far today. Daily 2-StDev Volatility Bandwidth was expanding at 146 pips, with ATR (14) expanding at 104 pips. The 1D 200 SMA was at 6.1149, while the 1D 20 EMA was at 6.2204.