It's not just today's  fix, which  could be viewed a bit better than expected,  but rather it's  the  cumulative fact the Pboc has allowed the Yuan to depreciate nearly .7 % over the last 5 trading days which  breaks with the  Pboc  typical  pre-trade talk modius operandi

This seems to have gone largely unnoticed by the markets to the extent the Yuan's latest moves have been sort of trivialized. 


Yuan Watch and reading the tea leaves

Even though reports of official sector intervention, the offshore Yuan (CNH) declines below 7.10 amid weaker Yuan fixing- the lowest since March 21, 2008.

So why could this be viewed negatively for risk?

It breaks with the Pboc typical pre-trade talk modius operandi of holding the Yuan on a stable to stronger tangent. Moreover, perhaps the Pboc are sending a message to the US trade hawks that will let the Yuan gradually weaken as a policy weapon to neutralise the effect of increased tariffs.

Remember the Yuan and the Pboc supposedly manipulation has been an at the epicentre of US-China trade talks.

While the markets are currently sitting in a state of currency war detente, with the Pboc possibly putting one of their trade wars cards on the table, it's not the cheeriest of signals for risk assets in my views.


Gold Markets

Gold and silver skew lower again this morning, with fast money selling ahead of Fed Chair Powell's speech this despite episodes of risk aversion returning amid US-China trade tensions. However, the uptrend remains alive and well.

Given the sturdy position build above $ 1500, traders are more apt to be sellers on rallies as opposed be builders of positions on dips.

However, vols continue to hold up suggesting no one is losing the long position plot while gamma is expected to remain firm during the Feds Jackson Hole symposium. 1m is at +14. vol and the 1m 25-delta risk reversal is + 2.60 vol for calls


Oil Markets

Oil markets remain in a trade war funk, and without sounding like a broken record, while sentiment runs poorly the markets remain at risk of turning negative again if there is no concrete evidence soon of progress on US-China trade talks.

Today Pboc fix in my view implies China believe they have a potent weapon in their trade war arsenal

Of course, I'm reading a lot into the tea leaves this morning.

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