China Caixin services PMI for August 55.0 (expected 54.0)

Caixin / Markit Services and Compiste PMIs for August 2022

Services 55.0

expected 54.0

  • prior 55.5

Composite 53.0

  • prior 54.0

Some of the analysis from the report:

  • Rare high temperatures and sporadic Covid-19 outbreaks were the main factors weighing on the economy in August. The impact of the extreme weather was more significant than that of the outbreaks. The resulting power shortages greatly restricted manufacturing production, whereas service providers remained largely unaffected. The manufacturing sector benefited more from lower expenses as a result of falling commodity prices than the service sector.
  • Right now, the economy is slowly recovering from a widespread outbreak of Covid-19 in the first half of the year, though it remains under pressure. While the central bank has recently cut key policy interest rates to guide banks to lower financing costs for companies and individuals, the effect will depend on market players’ confidence about the future. In addition, with the increase in adverse factors such as recurring Covid-19 cases and natural disasters leading to a sluggish job market and shrinking consumer demand, the government should step up measures such as additional subsidies and assistance for low-income groups.

BOJ USD/JPY intervention – the level to watch is 142 to 143

But, what now?

  • “Any sharp near-term move to the 142/143 would probably spark a much sharper verbal protest from Japanese authorities and put intervention back on the agenda”

ING further note:

  • “Shorter-dated implied option volatilities … still around the 12% area (vs 15%+ a few months ago) suggesting investors have downscaled fears over possible Japanese FX intervention to sell USD/JPY.
  • While we all acknowledge that Japanese authorities would be trying to turn back the tide here (USD/JPY is above 140 for good macro reasons) we should not discount intervention completely”

Note – The Bank of Japan conducts intervention in the yen on instructions from the Ministry of Finance. Hence, its worthwhile having regard to MoF officials on yen movements. At ForexLive we headline these, so you can stay informed. We have had such comments from the MoF (and the BOJ and other government departments/ministers) quite often in recent months, mostly when the yen depreciates sharply. if you’ve been following along you’ll have noted these. So far its been hot-air, just verbal ‘intervention’. A sign of impending actual intervention activity in the forex market will be more strident comments from Japanese officials and more explicit threats of yen buying. We’ll keep on top of these if/when they come.

USD/JPY daily:

usdyen daily chart 05 September 2022
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