China could tighten in mid-2018

China’s economy has showed a slight deceleration, but nothing dramatic. Still, to keep capital from flowing elsewhere, the People’s Bank of China might tighten interest rates in mid-2018.

Chinese October retail sales increased 10.0% annually, below expectations of 10.5%. Fixed investment rose 7.3%, and industrial production increased 6.2% - both behind expectations. So growth is slowing, not surprisingly, given the central bank’s war on shadow lending and pollution. China’s 10-year government bond yield has risen to the highest level in three years, despite injections of CNY 150 billion via reserve repos.

 


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This has allowed CNY to gain, with USD/CNY falling to 6.64. Stronger than expected trade growth continues to support the economy which we don’t see slowing significantly in 2018.
see the PBoC flowing the fed lead with tighter rates in mid-2018.

This report has been prepared by AC Markets and is solely been published for informational purposes and is not to be construed as a solicitation or an offer to buy or sell any currency or any other financial instrument. Views expressed in this report may be subject to change without prior notice and may differ or be contrary to opinions expressed by AC Markets personnel at any given time. ACM is under no obligation to update or keep current the information herein, the report should not be regarded by recipients as a substitute for the exercise of their own judgment.