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Trade tensions rise, impacting gold prices as buyers seek potential highs and sellers devise strategies.
Gold prices are stabilizing as renewed trade tensions draw in buyers. Recently, tensions rose when Trump accused China of breaking an agreement, resulting in a 50% increase in steel tariffs. Gold continues to trend upward due to expected easing from the Fed, although anticipated rate cuts could impact prices. Key economic data, such as the NFP and CPI reports, will significantly influence price movements.
On the daily chart, gold has crossed a downward trendline, indicating the potential for new highs, targeting 3438. If prices reach 3438, buyers may increase their positions, while sellers could expect a drop to the main upward trendline.
The 4-hour chart shows a breakout and positive momentum. A pullback near the minor upward trendline would be a good opportunity for buyers looking to reach 3438. Sellers might wait for prices to decrease to target the 3200 level.
The 1-hour chart reveals a support zone around 3330. Buyers are likely to enter at this level, aiming for higher prices if they stay above support. Sellers will look for a breakdown below this level to continue a pullback to the minor upward trendline.
Upcoming economic indicators include US Job Openings, ADP, ISM Services PMI, Jobless Claims, and the NFP report.
The article highlights recent gold price activity and ties it to technical and economic factors, noting the rise in tariffs and anticipated central bank policy changes like rate cuts, which usually bolster gold prices. The charts show positive momentum, with higher support and resistance levels, indicating ongoing interest from buyers. The 1-hour, 4-hour, and daily charts all suggest a move toward 3438 unless economic surprises occur.
We see strong upward pressure with regular pullbacks on shorter timeframes. Expect increased volatility around important economic data, but the overall trend is upward. Temporary retracements, especially toward support near 3330 and the minor upward trendline, should be viewed as opportunities rather than threats.
The larger trend remains strong after breaking above the previously discussed descending structure on the daily chart. This is often a reliable pivot where former resistance becomes support. Seller fatigue has been noted just above this level, with momentum building each time buyers return to recover short-term losses.
With several important US economic releases approaching, be prepared for swift and sometimes dramatic price fluctuations—especially right after announcements. This includes employment statistics and service sector performance, which significantly impact rate expectations. How these numbers align with forecasts will likely influence market expectations regarding central bank actions, which in turn affects gold pricing through yields and the dollar.
We expect selling pressure around the 3438 level, but this will likely involve closing short positions rather than aggressive selling. This reaction often indicates that the market is digesting gains before choosing a direction. A close above 3438 with ongoing buying would signal strong confidence and possibly lead to further upward movement.
Currently, levels between 3330 and the minor upward trendline near 3260 serve as areas for potential accumulation. Support zones that react quickly on shorter timeframes often reflect deeper liquidity, allowing larger traders to build positions without significantly moving the market. If these levels trigger buying and push gold above recent highs, it will reinforce the current bullish trend.
We’ve observed that shorter-term movements align with broader market sentiment—buyers tend to act quickly, and pullbacks are usually shallow. As long as macroeconomic data supports easing and geopolitical tensions remain, this trend should continue in the near term.
However, risk always exists with sudden shifts in economic numbers. For instance, stronger-than-expected job growth or inflation could delay easing and rapidly change rate expectations, typically strengthening the dollar and temporarily reducing demand for metals. Therefore, monitoring real-time changes in bond yields after announcements can provide early warning signs.
In conclusion, prices are firmly within a bullish structure, showing technical support across multiple timeframes. The upcoming data will determine if we revisit local support levels or push towards new gains.
Switzerland’s CPI shows a yearly decline, with core inflation easing, complicating the SNB’s position
Switzerland’s Consumer Price Index (CPI) for May 2025 fell by 0.1% compared to last year, which matches what experts predicted. This is the first time since March 2021 that inflation has turned negative, as reported by the Federal Statistics Office.
Core CPI, which leaves out volatile items like food and energy, increased by 0.5% year-on-year, down slightly from 0.6% before. These latest numbers suggest that deflationary pressures are returning, making things tricky for the Swiss National Bank as the Swiss franc becomes stronger.
The Economic Setting
The latest data clearly shows a significant trend. Prices in Switzerland are decreasing, though not by a large amount. This means that prices today are slightly lower than they were last year. While we expected this decline, its arrival changes how we understand the current economic landscape—especially since it’s the first time in four years we’ve seen negative inflation. While the drop isn’t alarming yet, it needs our attention. When we look more closely and exclude items like food and energy, we find that inflation is still above zero. This means there are still some upward price pressures, even if they are easing a bit. It isn’t urgent, but it hints that price softness is affecting more areas of the economy. Jordan and his team now have fewer options to work with. The strong currency is making imported goods cheaper, which lowers consumer prices. However, a stronger franc can also hurt export competitiveness, creating a tension we’ve seen during past tightening cycles. This reflects the delicate balance monetary authorities have to maintain.Implications for Monetary Policy
For those impacted by interest rate changes and related volatility, it’s time to rethink strategies. The chance of further policy easing looks a little higher than it did a month ago. This isn’t due to a collapse in growth, but because the falling rates of both general and core inflation offer more flexibility. In the near term, we should pay close attention to yields on short-end instruments. These are sensitive to signals from central banks, and under the current circumstances, they might start indicating expectations for a softer rate strategy. We might see a rise in carry trades, especially those focused on stability rather than high-risk opportunities. This situation may also affect broader European macro positions. Changes in Switzerland’s curve could impact neighboring countries’ bond spreads. We’ve observed a stronger correlation when monetary policies diverge. Timing is the real challenge now. Predicting future prices requires more than just looking at past trends—it needs analysis based on actual price behaviors. For the moment, when implied ranges contract and realized volatility remains low, there’s usually an opportunity to trade by betting against extreme outcomes. This is a time when certainty can lead to complacency. We need to stay alert. Keep an eye on the data calendar, especially on monthly reports that can shape real-time rate expectations. And, remember to consider the broader effects of foreign exchange changes. Create your live VT Markets account and start trading now.Today’s anticipated reports include inflation data from Switzerland and the Eurozone, along with US job openings.
In the European session, we’ll see inflation reports for Switzerland and the Eurozone. The annual Swiss CPI is expected to be -0.1%, down from 0.0% last month. There’s a 32% chance of a 50 basis points cut at the upcoming Swiss National Bank meeting. A lower Swiss CPI could boost hopes for a larger rate cut.
In the Eurozone, the CPI is forecasted at 2.0%, down from 2.2% previously, while the Core CPI is expected to be 2.5%, down from 2.7%. There’s a 95% chance of a 25 basis points cut this week, with another cut likely by the end of the year. The European Central Bank plans to cut rates in June and will pause until at least September.
In the American session, April’s US Job Openings are projected at 7.1 million, down from 7.192 million. This follows a pause in Trump’s tariffs. The report is unlikely to have much impact due to its outdated information.
Key central bank speakers include BoE’s Bailey at 09:15 GMT, Fed’s Goolsbee at 16:45 GMT, Fed’s Cook at 17:00 GMT, and Fed’s Logan at 19:30 GMT.
Inflation data from Switzerland and the Euro area is set to influence markets. The Swiss Consumer Price Index (CPI) is expected to slightly dip to -0.1% year-on-year, a minor drop from last month. While this isn’t alarming, it adds fuel to the expectations of a bigger rate cut from the Swiss National Bank this month. Traders are already anticipating a one-in-three chance of a 50 basis points reduction, and a lower CPI would likely increase that probability.
For the Eurozone, inflation seems to be responding to monetary tightening. The CPI is predicted to fall to 2.0% from 2.2%, while the Core CPI may drop to 2.5% from 2.7%. The market sees a 25 basis points cut from the European Central Bank as almost certain, with 95% confidence. Policymakers have indicated this move, suggesting a June reduction followed by a pause until at least fall, depending on future inflation and wage data.
We see softer inflation on both fronts as a significant signal for traders. The narrowing rate difference between CHF and EUR instruments is hard to ignore, especially in interest rate markets. This week, options flows and positioning are likely to shift toward steeper easing curves. Any bond traders in neutral positions should rethink their exposure, as the 50 basis points move by the SNB seems underpriced given the risk.
Turning our attention to the US, the April job openings figure is unlikely to cause much reaction. The forecast is 7.1 million, slightly below the previous 7.192 million. While it’s a minor decline, it lacks relevance for the Federal Reserve’s forward guidance. This data arises amid trade tensions from earlier this quarter—tariff threats that were later rescinded—but many believe today’s figures will only serve as background noise.
What may have a greater impact are the scheduled comments from central bankers in the UK and US. Bailey speaks first in the morning, followed by Goolsbee, Cook, and Logan during the American session. Their comments are crucial now, given the sensitive positioning of short-end futures. Any deviation from prior policy statements could lead to quick market adjustments. We’ve noticed increased sensitivity in swap spreads and SOFR rate volatility since last week, which could react to unexpected changes in tone.
The key takeaway: fixed income desks should be alert for any surprising dovish or hawkish comments rather than focusing on headlines that are now mostly outdated. Meanwhile, euro and Swiss franc volatility sellers might rethink their strategies if negative prints continue. For traders, it’s essential to focus on what lies ahead, rather than looking back.
European equities start the week cautiously, with Eurostoxx and major indices recording slight gains
Eurostoxx futures rose by 0.1% in early European trading, showing a tepid response to Wall Street’s late rally. German DAX futures climbed 0.2%, and UK FTSE futures increased by 0.1%.
As the week and month begin for European stocks, caution prevails after a slightly muted performance yesterday. This cautious approach contrasts with futures in the US, where S&P 500 futures fell 0.3%. Trade developments are still a top priority, especially with a US-EU meeting planned for later this week.
European Equity Futures Reaction
European equity futures opened with slight gains across the board. This comes after a relatively soft session yesterday when market risk appetite decreased a bit. The modest rise in futures indicates a level of resilience, but it may reflect more of a delayed response than true confidence. Investors remain cautious, particularly due to the underperformance of US indices observed overnight. The decline in S&P futures suggests a balancing act between expectations and concerns. Even though Wall Street closed stronger, this positivity hasn’t carried over significantly to Europe. This reaction isn’t unexpected; rallies that happen late in the US trading day usually don’t trigger strong overseas responses, as investors in different time zones often wait to see if the momentum lasts. Trade discussions between Washington and Brussels are again in the spotlight, with a meeting scheduled this week that could influence broader policy discussions in the months ahead. Any updates on trade relations or cooperation between the two regions could impact global market dynamics. A move towards lower tariffs or a cooperative approach might improve sentiment in industrials and materials sectors, while any tensions could prompt defensive strategies. This anticipation contributes to the cautious trading observed in futures. Overall, volatility indicators suggest the market is in a wait-and-see mode. Recently, premiums for upside options have risen slightly, which typically happens when traders are hesitant to make large bets but want to stay protected in case of market shifts. This positioning implies that the market may continue moving sideways for now.Market Positioning And Currency Impacts
In practical terms, we are seeing more restrained intraday price movements, especially during European trading hours. This suggests that institutions are rebalancing instead of taking on new risks. In such scenarios, traders often turn to calendar spreads when there’s no strong directional bias, allowing for positioning without excessive exposure to sudden price changes. It’s important to note that currency pairs, especially those involving the euro and pound, are showing clearer trends. This affects equity futures, particularly from a macro fund perspective. We’re monitoring whether the euro stays stable or adjusts in response to interest rate discussions and bond yields within the region. These dynamics often impact DAX pricing more directly than news headlines might indicate. Comments from Scholz regarding fiscal strategies and industrial subsidies generated brief interest earlier this week but did not significantly influence bund futures. Still, we remain attentive to such statements, as traders tracking commodity sectors often react quickly to even minor hints of policy changes. In this context, sector-specific derivatives may present better opportunities than broader index trades. As the week unfolds, especially with Friday’s meeting between the two economic powers approaching, our strategy is to stay flexible. This doesn’t mean being completely neutral; rather, we’re seeking hedges that suggest short-term caution while maintaining long gamma exposures. It’s less about direction and more about timing any potential market movements. In summary, market sentiment is subtly shifting beneath the surface, where we often find promising trading opportunities. Whether this manifests in the coming sessions will largely depend on insights from policymakers rather than traders alone. That’s always the game — making positions based on anticipated actions of others, not just current knowledge. Create your live VT Markets account and start trading now.Dollar shows slight stability after yesterday’s decline amid ongoing trade uncertainty and pressures
The market is showing a cautious mood as we begin trading in June. There are just 36 days until Trump’s trade deal deadline, and legal disputes over tariffs are still ongoing.
The dollar faced some difficulties yesterday, dropping at the start of the month but showing some recovery today. Its situation is still shaky, even as sellers back off. The USD/JPY rate is around 143.00, with earlier lows at 142.36 posing a risk to short-term support.
Last week, the inability to hold above 145.00 led to consecutive declines, giving us a brief pause now.
The EUR/USD pair has dipped by 0.2% but remains above 1.1400. Similarly, GBP/USD has also fallen 0.2%, staying above 1.3500.
The Australian and New Zealand currencies are experiencing bigger losses today. The AUD/USD has fallen by 0.5% to 0.6457, failing to break past the 0.6500 level once again.
Focus is shifting to upcoming economic data, with the US jobs report set to be released on Friday and the ECB policy meeting scheduled for Thursday.
This summary highlights a period of caution as we move into June. Traders seem to be pulling back ahead of major events, while key currency pairs are staying within familiar ranges. Although there is still pressure, overall volatility is limited for now.
Given the current situation, there’s a growing sense of hesitation among key assets. Trump’s deadline, now just over a month away, adds to this uncertainty. Legal issues concerning tariffs are also raising doubts about any near-term policy changes. While there isn’t panic, these factors are influencing trading models used to predict short-term trends.
The dollar’s drop on the first day of June highlights ongoing uncertainty. Its slight recovery today shows there isn’t a strong consensus yet. However, broad selling appears to have slowed, indicating cautious adjustments rather than renewed enthusiasm. In USD/JPY, for example, the inability to build on previous gains and the retreat to 143.00 suggest that bullish positions are dwindling. The earlier drop to 142.36 is still a concern from a support standpoint, and additional pressure could break that level, especially with external events still on the horizon.
After multiple attempts, the failure to maintain the 145.00 level last week has made it clear that this area is tough to reclaim. This decline is more than just a temporary pause; it reflects a wider range that short-term speculators need to consider. The current stability shouldn’t be seen as something permanent, but rather a quieter period before the major events later in the week.
For EUR/USD, the slight 0.2% decline keeps it within its expected trading range. The pair hovers comfortably above 1.1400 but lacks the upward momentum seen previously. Similarly, GBP/USD stays above 1.3500, although recent weakness suggests that momentum is fading. Larger moves may be waiting for a more compelling narrative.
The Australian and New Zealand dollars are facing stronger selling pressure. In particular, the AUD/USD’s 0.5% drop to 0.6457 reinforces the barrier at 0.6500, which has held firm through multiple attempts. Each failure makes it harder to break through. Traders frustrated with these failed upside moves may be shifting their strategy downward.
This week is busy. With Friday’s US job data expected to attract significant attention and Thursday’s ECB policy decision likely to challenge previous assumptions, the current calm may not last long. Bond markets are already showing signs of nervousness, indicating that pricing models are adjusting.
If employment data meets expectations, we might see another adjustment in implied volatility. Meanwhile, the central bank’s strategies will be tested on how much they are willing to adapt to ongoing inflation issues. Depending on their responses—one focusing on job availability and the other on price fluctuations—we could see clearer direction early next week.
For now, it’s wise to be patient. Jumping into positions right now may lead to unexpected reactions, especially if the consensus is challenged. We prefer to reduce leverage while waiting for better conditions. The data will guide us.
Markets remain unsettled amid ongoing trade discussions, creating uncertainty and unanswered questions.
**Negotiations with Japan and India**
A US federal court has temporarily reinstated reciprocal tariffs. Plaintiffs must respond by June 5 and the administration by June 9. Trump has urged countries to submit their best offers by June 4 during ongoing negotiations.
Negotiations with Japan and India are facing challenges, with only 36 days left to finalize trade deals. Talks with China are not progressing, even with a truce in place. There are reports that Trump and Xi might communicate this week, but China has not provided any updates.
The negotiation period has lasted 54 days, leading to questions about whether Trump will extend it or if he will face legal challenges over his tariffs. The stalled talks raise concerns about potential tariff increases on China if no progress is made.
This uncertainty is affecting confidence in the US dollar, which is already under pressure from inconsistent policies and ongoing doubts.
**Market Sentiment and Tariff Uncertainty**
This update reveals the weak sentiment in the market at the start of the month, largely influenced by unclear policies and high-stakes negotiations. Although technology stocks have shown a slight rebound, overall concerns remain. The core issue is not just the tariffs but also the unpredictability of government actions.
The US court’s decision to temporarily reinstate tariffs puts pressure on both government officials and challengers. With tight deadlines, plaintiffs need to act quickly, while the administration faces its own deadline soon after. Trump’s urging for trading partners to submit their best offers adds more pressure, making June 4 a critical date.
Discussions with Japan and India are hitting roadblocks, and there are few days left to address significant gaps. The mood regarding China is cautious. While there are hints of high-level talks, the lack of communication from Beijing offers little hope.
After nearly two months of negotiations, results are scarce. This raises questions about whether the administration will extend this period or consider increasing tariffs, which could spark legal challenges and lead to further confusion. Each route presents different consequences, especially for those monitoring future pricing.
The currency markets are feeling the strain, and confidence in the dollar is shaky. This instability isn’t about interest rates, but rather stems from policy inconsistencies and changing statements. Participants are frequently reassessing volatility, showing reluctance to take strong directional bets.
Short-dated options markets indicate that traders are frequently adjusting their expectations, with implied volatility peaking around court deadlines. There is increased demand for protections against rapid changes in geopolitical or trade risks.
Given this uncertainty, there is little reason to hold unhedged positions in currency pairs affected by tariff discussions. Instead, we’re seeing more activity in straddles and strangles, suggesting traders anticipate significant movements without a clear direction.
Exposures without rebalancing, especially in the one-to-three-week timeframe, now carry a higher risk of unexpected outcomes. This may require adjustments in margin allocations and closer monitoring of correlations between different assets, particularly where dollar weakness meets increased equity volatility.
The uncertainty in negotiations has blurred what were once clear tactical positions. Traders are adapting by diversifying risk and reducing trade sizes. Overnight rates are being closely monitored as indicators of both policy direction and short-term funding stress.
As risk appetite fluctuates, it’s important to pay attention to officials’ statements and the silence from other parties, and how this affects spreads. We are particularly focusing on short-term implied rates as indicators of market expectations regarding the progress—or lack of it—in these talks.
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Ueda points out Japan’s negative real wages, possible wage growth slowdown, and the effects of tariffs on the economy
The new US tariffs are expected to hit Japan’s economy hard, particularly affecting export companies at first. If these tariffs reduce profits for exporters, this could lead to negative effects on households and businesses, hurting consumer confidence.
Right now, Japan is facing negative real wage growth, which is affecting consumption and the overall economy. US tariffs could also reduce winter bonus payments for companies, which might influence next year’s wage negotiations.
Although wage growth may slow temporarily because of these tariffs, it is expected to pick up again soon after. Even so, consumption is likely to see a steady increase as real wages gradually improve.
These changes do not indicate that the Bank of Japan will raise interest rates anytime soon. The Governor of the Bank has mentioned that Japan’s economy is on a moderate path to recovery. However, recent comments from the Governor have led to a drop in the yen’s value. There are different views on the best pace for the Bank of Japan to reduce its bond purchases.
The text explains how the recent US tariffs could affect Japan’s economic activity, especially through pressure on exporters’ profits. Since Japan relies heavily on exporting goods, any loss in revenue can impact corporate earnings and eventually households, especially regarding bonuses and regular wages.
Currently, even with some nominal wage improvements, Japan’s real wages (adjusted for inflation) are still negative. This means households have less purchasing power, which slows down consumer spending, casting doubt on overall economic growth. Bonuses, especially those given in winter, may shrink due to lower corporate profits, affecting annual wage negotiations and workers’ earnings into the next year.
Nonetheless, it is expected that real wages will gradually recover, which will help boost consumption over time. This does not indicate an urgent need for interest rate changes. Recent comments from Governor Ueda show signs of continued, moderate economic growth, and the central bank is sticking to its current strategy.
However, Ueda’s remarks have caused the yen to weaken. A weaker yen can increase costs for imports, particularly energy, which Japan relies on. Yet, it may also give some exporters relief from the pressure of tariffs on their margins.
Regarding monetary policy, there is ongoing debate about how quickly the Bank should reduce bond purchases. While inflation is above target at times, the current wage and consumption data do not support a rapid reduction. This mixed information suggests that there might be fewer asset reductions from the balance sheet in the near future than some market participants had anticipated.
For traders in options and futures, this situation calls for careful monitoring of fixed-income flows and currency positions. The impact of bonus season—and subsequent salary negotiations—could change interest rate expectations faster than the Bank currently predicts. While the bias may lean towards being dovish, there is potential for gaps to appear. The yen’s recent responses to policy comments indicate it is very sensitive to tone, not just substance.
With this in mind, we will closely watch private-sector forecasts and any sudden changes in household spending, particularly after bonuses are distributed or reduced. These data points will be crucial in shaping expectations about wage trends, policy timing, and volatility in related assets. Staying ahead of changes in domestic consumption will be vital.
China’s manufacturing PMI drops to 48.3, signaling eight months of contraction and a significant decline
China’s Caixin Manufacturing PMI dropped to 48.3 in May 2025. This is the lowest level since September 2022 and shows the first contraction in eight months. It was below the expected 50.7 and the previous 50.4. In contrast, the official manufacturing PMI increased slightly to 49.5, still indicating contraction but improving from the earlier 49.0.
Manufacturing output and new orders both fell, with export orders hitting their lowest point since July 2023. Employment, especially in investment goods, decreased quickly. Input and output prices kept declining. Supplier delays remained minimal, and inventories stayed steady since purchases were lower. Business confidence rose a bit due to positive external conditions.
NBS And Caixin PMI Overview
The NBS PMI looks at large state-owned enterprises across various sectors. This official index is created by a government agency and shows policy-related economic stability. On the other hand, the Caixin PMI focuses on small to medium-sized enterprises that are more sensitive to market and external changes, giving insight into the private sector. Both PMIs are released monthly, shedding light on different parts of China’s economy. The NBS PMI offers a macroeconomic view, whereas the Caixin PMI emphasizes market-driven industries, helping us understand China’s economic situation better. Recent results from both indices show a broader issue in activity levels throughout the sector. With the Caixin PMI falling below 50, this isn’t just a slowdown—it clearly signals contraction, and it’s significant. The latest figure is the lowest since late 2022, and it comes with a concerning drop in new orders, both domestically and internationally. Export demand is the weakest it has been since mid-last year, indicating waning external interest. This carries a broader implication.Employment And Economic Indicators
The NBS gauge did rise slightly, but it remains below the neutral level of 50. While this uptick might appear positive, it looks less so when considering the overall ongoing weakness. Companies, especially those in global trade, are experiencing both reduced demand and persistent pricing challenges. Lower input and output prices reflect easing costs but also suggest firms are cutting prices to secure orders. The differences in employment across sectors are noteworthy. Rapid job losses in investment goods indicate that capital spending may be slowing. This category often signals future industrial growth, and its contraction shouldn’t be overlooked. The manufacturing sector is losing momentum faster than larger firms’ indicators might suggest. Inventory management adds another piece to the puzzle. Companies are not increasing stock; they are adapting to weaker orders by keeping input purchases stable. This cautious approach in supply chains, especially when delivery times are stable, usually signifies that companies are not expecting short-term improvement. While some may have felt encouraged by the small rise in business sentiment, it remains a minor highlight in a largely bleak outlook. This slight increase in confidence might show hope rather than solid expectations. After a long period of stagnation, it’s common to see such optimism, but hope alone does not drive movement. The differences between the two indices are standard and provide valuable insights. One tracks state-influenced firms, while the other focuses on agile, market-driven businesses. When smaller firms, which often respond more quickly, begin to retreat, that shift warrants attention, particularly for those making forward-looking trades. Monitoring these indicators in the coming period will be crucial for those syncing their strategies with industrial activity and external demand trends. It’s not just about what’s happening now but the implications of weaker employment, declining prices, and reduced orders for companies without government backing. We may see responses that boost demand or ease credit restrictions, but any delay could impact asset pricing. Short-term positioning might do well in this muted demand environment if volatility persists. Longer duration investments will require careful management, as falling prices and overall lack of momentum could challenge stability. Create your live VT Markets account and start trading now.China’s central bank sets USD/CNY reference rate at 7.1869 as markets reopen post-holiday
Chinese markets have reopened after a holiday on Monday.
The People’s Bank of China (PBOC) sets the daily midpoint for the yuan (renminbi or RMB). This is part of a managed floating exchange rate system. It allows the yuan’s value to change within a specific range, called a “band,” around a central reference rate or “midpoint.” Currently, this band is set at +/- 2%.
The previous closing rate was 7.1961.
On the monetary side, the PBOC injected 454.5 billion yuan into the banking system through 7-day reverse repos, with an interest rate of 1.40%.
This article discusses key actions from the Chinese central bank after the market reopened following a public holiday. When the PBOC sets its daily yuan midpoint, it controls how much the currency can move that day. Unlike some other major currencies, the yuan isn’t free-floating; it operates within a narrow channel—plus or minus 2% around the official rate.
With the yuan having closed at 7.1961, traders were eager to see how the midpoint would change. The new midpoint influences the market, showing whether policymakers accept recent depreciation or want to stabilize the currency.
Additionally, the central bank added over 450 billion yuan to the banking system using seven-day reverse repos at a 1.40% rate. This move indicates short-term cash support and hints at how the authorities want to manage conditions as the month progresses.
A few key points emerge. First, keeping an eye on how closely the traded rate aligns with the midpoint gives insight into PBOC sentiment. If traders keep pushing the currency toward the weaker edge of the band and the PBOC doesn’t respond, it sends a clear message. There may be some tolerance for slight fluctuations, but a strong defense could quickly follow if the currency overshoots.
Secondly, the large liquidity injection through short-term repos suggests a focus on maintaining domestic liquidity instead of fighting inflation or curbing excessive lending. Yields aren’t rising. This typically supports short-term strategies and shows that authorities want to keep money markets fluid rather than tighten them.
Traders dealing with RMB pairs should closely monitor the midpoints released overnight. These figures are not random; they represent high-level policy perspectives, especially during uncertain global risk conditions or weak Chinese macro data. While currencies might drift quietly for a while, significant deviations from reference levels can provoke policy responses.
It’s also useful to observe high-frequency flows. If the size of repo injections starts to decrease, it might indicate less caution or a desire to raise borrowing costs. For now, though, the scale leans heavily toward accommodation. Seven-day maturities suggest that this liquidity support is temporary, serving as a short-term fix rather than a strategic shift.
Keep an eye on state bank flows during London and US trading hours. If these banks begin to buy RMB aggressively as the currency approaches the 7.20 mark, it might signal important limits.
Stay adaptable with your positioning. When Beijing makes incremental adjustments like this—tweaking rates, guiding the fix, and providing frequent injections—it conveys policy intentions without formal statements. The signs are there for those who are attentive.
Australia plans to raise minimum wage to $24.94, exceeding inflation, according to Reuters
Australia’s minimum wage will increase by 3.5%, helping 2.6 million workers.
The Fair Work Commission made this announcement, effective from July 1, raising the wage from $24.10 to $24.94 per hour.
