It was a waiting session for U.S. inflation data due later Wednesday until news broke from China that the State Council is considering a proposal for local governments to across the country are buying millions of unsold homes in an effort to further help populations in dire need. real estate market. Unsold homes constitute a huge glut on the market and constitute what might be considered “toxic assets,” ripe for a relief program. The plan is reportedly still in its early stages.
For FX, the news meant an offer on the Australian dollar, a “China-proxy” transaction, as well as the yuan. Forex also gained more broadly against the dollar.
Earlier in the session we got quite a bit of information, none of which had much impact.
Kansas City Federal Reserve President Jeffrey Schmid spoke, confirming the Federal Reserve’s current position of keeping rates higher for longer due to “more work” to be done on inflation . Loretta Mester, president and CEO of the Federal Reserve Bank’s Cleveland branch, made similar comments in an interview with the Wall Street Journal, saying it was appropriate for the Fed to hold rates steady while awaiting evidence that Price pressures are easing further.
The People’s Bank of China left its policy rate, the medium-term lending facility (MLF), unchanged when rolling over maturing medium-term loans, in line with market expectations. The rate was kept at 2.5%, with 125 billion yuan in one-year MLF loans to replace the 125 billion expiring this month. On Monday, the Bank will set the Loan Prime Rate (LPR). An unchanged MLF rate strongly suggests unchanged LPR rates, although this is not always the case (see the MLF article linked above for more on this).
Wage growth data for the first quarter of 2024 comes from Australia. This was slightly below expectations, as well as the previous quarter, and the first decline since the worst of the pandemic.
USD/JPY was moderate today. He only maintained a small range. We have been spared the usual ineffective rhetoric from Japanese officials.
The offshore yuan gained thanks to the plan to buy back Chinese assets in difficulty (unsold houses!):
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