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On August 2nd, Iranian Foreign Minister Araqchi held separate phone calls with Pakistani Army Chief of Staff Mohammad Munir and Turkish Foreign Minister Fedan Ibrahim on August 1st, local time. During the calls, the parties discussed the latest regional situation and exchanged views on the consequences of the United States aggressive and destabilizing actions, as well as the escalating regional tensions and security risks. Araqchi warned the US military against any risky actions and emphasized that Iran is fully prepared to safeguard its national sovereignty, security, and territorial integrity, and will resolutely respond to any infringement.According to Saudi media alhadath, the Iraqi Armed Forces Commander-in-Chief has ordered the establishment of a Joint Security Committee, instructing it to fulfill its responsibilities in protecting sovereignty and good neighborly relations.On August 2, Irans Islamic Revolutionary Guard Corps (IRGC) stated that its air force launched multiple ballistic missiles that morning at a U.S. F-35 fighter jet maintenance hangar and tarmac at the Azraq Air Base in Jordan, in retaliation for the U.S. attack on Qeshm Island. The IRGC claimed the attack destroyed three F-35 fighter jets and severely damaged three others.The Canadian Public Service Employees Union announced that WestJet flight attendants had issued a 72-hour strike notice. WestJet subsequently issued a 72-hour work stoppage notice.The Iranian Foreign Ministry stated: As the United States continues to violate the June 28 ceasefire agreement, maintains a maritime blockade of Iranian ports and commercial shipping, launches brutal attacks across the country, intensifies economic pressure and illegal threats, and engages in acts of aggression against Iran, our armed forces will continue their defensive and counter-offensive efforts with all their might.

On weaker China PMI, stimulus focus, and US NFP data, USD/CNH rose above 6.9100

Daniel Rogers

Sep 01, 2022 15:24

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While the USD/CNH halted its three-day rally on Wednesday, it has since recovered some of its lost ground during Thursday's Asian trading as risk aversion and disappointing activity statistics push the pair higher. The pair's purchasers, however, are treading carefully as they await the introduction of the Chinese government's stimulus plan.

 

Caixin Manufacturing PMI in China fell to 49.5 from 50.2 predicted and 50.4 earlier, signaling the steepest decline in activity in three months. In doing so, the private manufacturing index confirms the gloomy state of the world's largest industrial sector, just as the official NBS PMI does.

 

According to Reuters's citing of state-run media, the Chinese cabinet has announced that the country will unveil the specifics of a set of recently announced policy changes at the start of September. According to the report, China's cabinet also plans to instruct commercial banks to make available medium- and long-term loans for infrastructure development and modernization.

 

Their power is bolstered by factors like China's covid-led lockdowns and rising tensions with Taiwan. The president of Taiwan, Tsai Ing-Wen, has recently expressed an interest in bolstering ties with the United States in the semiconductor industry.

 

The USD/CNH exchange rate also appears to be driven by central bankers' aggressiveness and strong US Treasury rates notwithstanding deteriorating data. Nonetheless, US 10-year Treasury rates have increased to a two-month high of around 3.21 percent, and 2-year bond coupons have increased to their highest levels since 2007 at around 3.51 percent. The S&P 500 Futures were trading at 3,930, down 0.36 percent intraday, their lowest level since late July as of publishing.

 

The US ADP Employment Change rose by 132K on Wednesday, below the 288K forecast and the 270K prior reading. However, year-over-year wage growth in August was 7.6 percent in the United States, which put Fed policymakers on edge. Following the release of the statistics, Cleveland Federal Reserve Bank President Loretta Mester told Reuters on Tuesday that she did not anticipate a rate cut from the Fed in 2019. Further, Lory Logan, the recently installed president of the Dallas Fed, has joined the ranks of hawkish central bankers by declaring, "Restoring price stability is our primary aim."

 

High inflation numbers and hawkish pronouncements from European Central Bank (ECB) and Bank of Japan (BOJ) policymakers highlight the central bankers' typically hawkish posture not only in the United States, but also in the Eurozone and Japan.

 

Positive news about the Chinese stimulus and the expected increase in the US ISM Manufacturing PMI for August from 52.0 to 52.8 on Friday should attract traders ahead of the release of the US Nonfarm Payrolls report on Friday (NFP).

 

At the time of writing, a USD/CNH decline seems unlikely until a support line near 6.8850 is broken. Even still, Monday's multi-month high of 6.9326 seems to have drawn buyers.


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