Aussie extends this week's recovery as RBA governor Glenn Stevens hinted that the central bank will stand pat in December. Stevens said yesterday that "we've got Christmas. We should just chill out, come back and see what the data says." Meanwhile, he also noted that "the effects of a decline in the exchange rate are proving a bit slow to come through." And, "slow wage growth makes for a low underlying rate of increase in domestic costs." Thus, "inflation would not be a barrier to further easing of monetary policy, should that be useful to support demand." But markets have been paring back expectations of a rate cut next year since the spectacular job report released earlier this month. Markets are only pricing less than 50% chance of a 25bps cut by May, comparing to more than 80% a month ago.
In Japan, minutes of October 30 BoJ meeting noted that "a few members added that the projected delay in the timing of reaching 2 percent had also been partly attributable to a somewhat slow improvement in the output gap." Regarding exports, the minutes noted that they were "been more or less flat in the July-September quarter". And, by region, exports to advanced economies maintained "moderate uptrend" but those to emerging economies" had shown somewhat sluggish movements". And, "members concurred that the timing of reaching around 2 percent was projected to be delayed compared with the projection in the July 2015 interim assessment, but this was due mainly to the effects of the decline in crude oil prices, and the underlying trend in inflation had steadily been improving."
In China, effective November 20, PBOC's Standing Liquidity Facility (SLF) rates were lower with the overnight rates down -175 bps to 2.75% and the 7D SLF rate down -225 bps to 3.25%. The SLF was introduced in 2013 as PBOC sought to meet the short-term liquidity demand of large financial institution during of periods of tight liquidity. The operations also aim at reducing interest rate volatility and preventing liquidity risks. The move this time marks an early step for China's establishment of the interest rate corridor and the central bank's commitment in the interest rate liberalization reform. It should be noted, however, that the SLF rate cuts should not be interpreted as a replacement for benchmark interest rate cut or for RRR reduction. Indeed, further easing though RRR and interest rate reductions is highly likely for rescue for growth slowdown. More in SLF Rate Cut A Step Further In Interest Rate Liberalization.
On the data front, Japan corporate service price index rose 0.5% yoy in October. Swiss will release UBS consumption indicator while UK will release BBA mortgage approvals in October. US will release personal income and spending, durable goods, jobless claims, house price index, new home sales.