Forex Top Team

Hong Kong and Shanghai Stocks Rebound on Lull in Yuan Weakness; Will It Spill Over to U.S. and European Markets?

Today, Hong Kong and Shanghai stocks are showing a firm performance. Although the Chinese government has not announced specific economic stimulus measures, Prime Minister Li Keqiang expressed confidence in achieving 5% growth during the Davos conference today. Market attention is also focused on the stabilization of the depreciation of the Chinese yuan. It appears that intervention to buy the yuan has been implemented through several state-owned banks.

US and European stock futures are also showing a firm performance in after-hours trading. It remains to be seen whether this trend will continue in overseas markets. If the risk-on sentiment persists, there is likely to be upward pressure on USD/JPY and yen crosses, following the flow in the Tokyo market. However, it should be noted that there have been repeated comments against excessive yen depreciation since last week, and the market is becoming sensitive to the speed of yen weakness. If USD/JPY were to quickly rise above the 144 yen level, for example, there could be a mix of buying and selling due to intervention concerns.

In the upcoming overseas markets, economic indicators such as Hong Kong’s trade balance (May), Canada’s consumer price index (May), US durable goods orders (preliminary) (May), US housing price index (April), US S&P/Case-Shiller Home Price Index (20 cities) (April), US new home sales (May), US Conference Board Consumer Confidence Index (June), and US Richmond Fed Manufacturing Index (June) are scheduled to be released.

The Canadian consumer price index is expected to show a significant slowdown, with a year-on-year increase of around 3.4% compared to the previous +4.4%. The Bank of Canada unexpectedly announced a rate hike in the recent policy meeting, but depending on today’s numbers, there is a high possibility of delaying further rate hikes.

There is a high focus on the Canadian consumer price index. It will be interesting to see the price movements following its release.