China calls a stop to yuan devaluation (+ video)

The Chinese yuan has managed to halt a three-day retreat yesterday (13 August) as the People’s Bank of China (PBOC) reassured the markets, where there were fears that this was the start of a currency war.

PBOC officials helped to restore market sentiment during a briefing in Beijing, where Vice Governor Yi Gang said that reports China wants a 10% depreciation of the yuan were “groundless”. Today the yuan was given a small boost against the US dollar by the PBOC’s fixing.

Plenty of data for Greenback to contend with

Turning to the US data from yesterday, markets welcomed the headline retail sales gain in July as they met expectations with a gain of 0.6%. Retail sales were particularly important as they might strengthen the likelihood that the US’s economic growth in the second quarter will be revised up from the current 2.3% – some analysts are now eyeing 3% growth. Other news was equally encouraging: Initial jobless claims remained low at 274,000, and consumer confidence was also up.

Today’s US calendar is also busy. The July producer price index and industrial production figures are out, as well as US industrial production and capacity utilization data from the Federal Reserve, manufacturing production numbers and the University of Michigan’s consumer sentiment print for August. (Got all that?)

Eurozone: Q2 figures fall flat… and Greece is back in the news

In Europe, yesterday’s German harmonised index of consumer prices was in line with expectations, as was French inflation at 0.2% year-on-year. But the real surprise in Europe was that the Greek economy grew 0.8% in the second quarter when the market was braced for a contraction, but unfortunately quarter three is unlikely to surprise us again because of the disruption capital controls caused last month.

Today is another busy day, as markets react to Q2 gross domestic product reports for the Eurozone as a whole, and Germany, France and Italy. So far the results have been a bit of a disappointment – France’s economy was static in the second quarter, and Germany’s growth was slightly slower than had been predicted (0.4% instead of 0.5%), even though its export growth was healthy enough. Italy is in much the same position – growth was 0.2% in Q2 but it was supposed to be 0.3%.

The final July consumer price index reading for the Eurozone is also out today. UK construction output is also scheduled for release, but is likely to be overshadowed by events in Greece and Brussels. Greek MPs were up all night, but eventually voted to approve the bailout deal. The victory is a hollow one for Prime Minister Alexis Tsipras, as the vote has revealed deep divisions within his party that are unlikely to be bridged before the confidence vote that’ll happen after the 20 August repayment to the European Central Bank.

Discussions about Greece’s latest deal will restart in Brussels at 12:30pm UK time, so we’ll have plenty to talk about on Monday. Have a great weekend. 

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