Japan Manufacturing Growth Accelerates in June as Orders Surge Despite Iran War Cost Pressures 
Gold Prices Fall Amid Rate Jitters; Copper Steady as China Stimulus Eyed 
Japan, U.S. Discuss Yen Weakness as Currency Intervention Concerns Grow 
Japan Keeps Markets Guessing as Yen Nears 40-Year Low, Raising Intervention Risks 
Wall Street Ends Mixed as Alphabet Slumps, Middle East Developments and Fed Outlook Weigh on Markets 
Asian Stocks Slide as AI Rally Pauses, South Korean Chipmakers Lead Regional Decline 
US Dollar Climbs to One-Year High as Fed Rate Hike Expectations Surge 
U.S.-Iran Diplomacy Helps Drive Gasoline Prices Down 15% From May Highs 
Yen Near 40-Year Low as USD/JPY Approaches Key 162 Level, Raising Intervention Concerns 
Singapore Inflation Stays Muted in May as Core CPI Misses Forecasts Ahead of MAS Review 
The Chinese yuan is expected to advance further in the coming weeks, by considering 1) the Fed’s dovish stance and China’s future stimulus measures; 2) the phase-one trade deal due to be signed on January 15 and; 3) a de-escalation of US-Iran tensions, according to the latest research report from Scotiabank.
China’s CPI inflation came in unchanged at 4.5 percent y/y in December, compared to market estimate of 4.7 percent. The softer-than-expected print seems to provide scope for the PBoC to deliver more monetary easing measures this year.
China is expected to implement more stimulus steps in addition to the 50 bp RRR cut effective from January 6 to further boost credit supply and revive economic growth, the report added.
Hovering expectations for further reductions in the rate of the 7-day reverse repos, 1-year MLF and 1-year LPR would anchor and pull down the front-end CNY IRS/NDIRS, while steepening the curves in the run-up to the Chinese New Year (January 25).
Meanwhile, the nation’s factory deflation eased further to 0.5 percent y/y in December along with growing factory activity, showing early signs of an economic recovery. China’s official manufacturing PMI stayed above the 50 threshold for the second straight month in December.
China’s commerce ministry announced on Thursday afternoon that Chinese Vice Premier Liu He will visit Washington D.C. on January 13-15 to sign the phase-one trade deal with the US. Hours later, US President Trump said at the White House that the negotiations for the second round of a US-China trade deal will start "right away," but might not be finished until after the election. It suggests a US-China trade truce could last till the 2020 US presidential election set for 3 November.
"We maintain our short USD/CNH position with a new target of 6.80 a trailing stop of 7.00, after the pair fell below the initial target of 6.95," Scotiabank further commented in the report.
