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What the Fed can learn from the People’s Bank of China (and the Bank of Japan)

  
  Analysis

An article on the Federal Reserve via the Nikkei, its an opinion piece well worth a read about how the FOMC is going to dial back its extraordinary stimulus and makes the point that:

  • both the PBOC and the BOJ may ultimately outpace the Fed in moving away from free money
For yuan traders the article provides good background on where the PBOC is at as of now:
  • The PBOC is tweaking overnight repo rate dynamics. 
  • It is using “macroprudential” tools to cool asset markets. 
  • It is capping credit to overleveraged sectors like housing and shadow banking entities.
  • Meantime, it is making liquidity more accessible for small businesses, and spearheading moves to shift debt burdens from local municipalities to central-government entities.
The winding back of stimulus measures in China has been a factor weighing on the AUD in recent weeks/months. Commodity prices have still been strong but looking forwards maybe not so much?
audusd chart pboc stimulus

Saudi Arabia’s energy minister says to UAE he wants “compromise and rationality” on OPEC oil deal

  
Analysis, Crude
Reuters have a recap up now if you’d like to check it out:
  • “Big efforts were made over the past 14 months that provided fantastic results and it would be a shame not to maintain those achievements. … Some compromise and some rationality is what will save us” 
In calling for “compromise and rationality” is the Saudi energy minister saying the UAE’s resistance to the deal so far is uncompromising and irrational? Or is that just my take on it? (Don’t think so). Monday’s meeting could be very fiery indeed ….
Saudi Energy Minister Prince Abdulaziz bin Salman with his tip for oil prices:
I posted earlier on the remarks from Saudi's energy minister here: Saudi energy minister comments ahead of Monday's continued OPEC talks

Oil giant Vitol expects oil prices to continue higher – more demand to outrun supply increases

  
Analysis, Crude

A Vitol executive speaking over the weekend, said that the 400K barrel per month (through to the end of this year) increase in supply being proposed by OPEC+ is insufficient to hold prices from rising.

  • “There is very little doubt, that whatever OPEC agrees by way of lessening of the cutbacks it will surely …. be a fraction of that amount needed to meet demand,” 
  • “OPEC are in a big chunk of the way towards their stated objective of getting the global inventory overhang back to manageable levels from their perspective, which is basically 2019 norm and we still have a market which has an outlook which for the spot months there is going to be more demand than supply.”
—
I posted earlier, and over the weekend on the continuation of OPEC+ talks scheduled for today, Monday.
  • Saudi energy minister comments ahead of Monday’s continued OPEC talks
  • Heads up weekend news – OPEC+ talks will resume on Monday
Long story short is that the OPEC+ coalition proposes to
  • bump its collective crude output by 400,000 b/d each month from August to December
  • and extend their supply management agreement through the end of 2022
However, the UAE wants its output allowance raised and has not yet agreed to the proposals.
—
Vitol is the world’s largest independent oil trader.
A Vitol executive speaking over the weekend, said that the 400K barrel per month (through to the end of this year) increase in supply being proposed by OPEC+ is insufficient to hold prices from rising.
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