The recovery in the Chinese yuan helped all currencies recover against the US dollar, including gold. Last week’s CNY decline was the biggest since that fateful 3rd week of August 2015 when equity markets collapsed, VIX spiked and the yen soared. But Beijing cannot use the currency as a weapon for too long as that would risk capital flight, lack of trust in its currency (not a good idea when you’re trying to add legitimacy to your currency system) and negative for global commodities. The euro remains the highest performer on the day after ECB members were reported to have considered market pricing for a December 2019 rate hike to be “too late”. Again, as long as oil remains elevated and the euro below 1.20 for too long, Eurozone inflation will have nowhere to go but up, which makes an ECB rate hike in Q2 or early Q3 all too possible.
PBOC Blinks, USD Drops