Yuan Strengthens on Pledged Policy Support, Sterling Rebounds Ahead of Central Bank Meetings
- Shams Ul Zoha
- July 25, 2023
- 1:05 pm
WHAT YOU SHOULD KNOW
- Chinese yuan gains over 0.5% after top leaders promise increased policy support for the economy.
- Euro and sterling steady after declines, with investors anticipating major central bank meetings.
- The European Central Bank and the Federal Reserve are expected to make rate decisions during the week.
China’s yuan strengthened as the country’s leaders promised increased policy support for the struggling economy. This positive sentiment was welcomed by investors, leading to a more than 0.5% gain in the yuan’s value in both onshore and offshore markets. However, despite the optimism, investors still sought more specific details on the proposed stimulus measures. Chinese stocks, particularly property-related ones, also surged in response to the news.
Meanwhile, the euro and sterling stabilized after experiencing several days of declines. Investors eagerly awaited major central bank meetings, with the European Central Bank and the Federal Reserve scheduled to make rate decisions during the week. The eurozone business activity survey showed a significant decline in July, causing traders to lower their expectations of future rate hikes by the European Central Bank. Any deviation from the anticipated 25-basis-point increase in rates at Thursday’s meeting would be a significant surprise.
In Asia, the yen remained under pressure against the dollar, struggling to recover from heavy losses on Friday due to speculation that the Bank of Japan (BOJ) would maintain its current yield control policy at the upcoming policy meeting. BOJ Governor Ueda’s cautious approach, despite recent economic developments, has left markets uncertain about the potential for a policy tweak.
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