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The case for a weaker renminbi remains intact

Although we now think policy rates in China will not be lowered further, we still expect the renminbi to weaken to 7.0/US$ this year. Markets Drop-In (22nd June, 10:00 ET/15:00 BST): Join our Markets team for this special briefing on the outlook for equities, bonds and FX and a discussion about revisions to our forecasts. Register now
Jonathan Petersen Markets Economist
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We doubt China’s stock market will go from strength to strength

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A stock market rebound makes little sense if a recession is nigh

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FX Markets Weekly Wrap

Souring risk sentiment reignites the dollar rally

The US dollar rose against all major currencies this week, reversing some of its fall over the past month or so. Much of this strength came late in the week as equity markets came under renewed pressure in the aftermath of the ECB’s hawkish message at its policy meeting yesterday. In particular, the lack of details on a “spread-fighting tool” pushed periphery spreads higher. And today, the higher-than-expected US CPI data added to evidence that the Fed will almost certainly raise rates by 50bp next week and will need to maintain its hawkish policy stance to bring inflation down. BoE Preview Drop-In (14th June, 10:00 ET/15:00 BST): Just ahead of the June MPC decision, we’ll explain in this 20-minute briefing why we’re even more convinced that UK rates will peak at an above-consensus 3% next year. Register now.

10 June 2022

FX Markets Update

Fed’s “QT” supports our case for a stronger US dollar

While we doubt it will be the main driver of the US dollar, the ongoing reduction in the size of the Fed’s balance sheet (i.e., “quantitative tightening”, or “QT”) adds to our conviction that the greenback will continue to appreciate over the rest of the year.

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We think a hawkish RBA will continue to support the AUD

Although we doubt it will appreciate much against the US dollar, we expect the Australian dollar to continue to hold up well relative to most other G10 currencies.

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