People's Bank of China - more stimulus to the economy and the latest Chinese data

Chinese data

The People's Bank of China will provide more stimulus to the economy by cutting the 1-year lending rate by at least 25bps. The Bank already cut 3 times taking interest rates from 5.60% to 4.85%. Foreign trade data for July fell short of expectations - the PBoC still has room to act because the latest CPI figures showed that inflation remained roughly stable in July with a reading at 1.6% actual data compare with 1.5% forecast and 1.4% previous month. But July's PPI is on lowest level since 2009 - at -5.4%y/y compare with -5% expected data.

Still bullish on USD

The 215k rise in NFP was slightly below expectations for 225k, as a robust read was viewed to lock-in a September interest rate hike. But he number will be enough to stimulate the Fed to act. We may get next evidence of improvement in the labor market condition index today, which is expected to rise to 0.8 in July from 0.5 in June.

Job creation over 200k since early 2014 and positive development in wage growth will suggests that US data would require “significant deterioration” in order to derail a September lift-off. However weakness in the stock market despite a majority of corporate earning betting expectations combined with further negative developments in commodity prices could keep the Fed from hiking in September.