News

Bank of Japan Governor Ueda appeared in parliament today.

Comments here.

He is still speaking.

One remark in particular caught my eye:

• No preset plan for rate hikes, will raise interest rates only if economy, prices turn up again, outlooks likely to be realised

This contrasts with what he has been saying in past months:

• BOJ would raise the policy rate this year if economic and price conditions continue to improve.

Ueda seems to be accepting that the economy has taken a turn for the worse … he’ll only hike:

• if economy, prices turn up again, outlooks likely to be realised

Bolding mine.

He also spoke of trimming tapering plans, see that link above for more.

JPY has dropped, USD/JPY is up nearly a big figure from its earlier low:

This article was written by Eamonn Sheridan at www.forexlive.com.

Ugly number this one. A big, big miss.

China Caixin May 2025 Manufacturing PMI 48.3, lowest since September 2022 and the first contraction in eight months

• expected 50.7, prior 50.4

Over the weekend we had an improving, though still in contraction, official manufacturing PMI:

• China May Manufacturing PMI rose to 49.5 (prior 49.0), Non-manufacturing 50.3 (prior 50.4)

The private-survey Caixin manufacturing PMI is awful though. China’s manufacturing activity weakened sharply in May, with the Caixin Manufacturing PMI falling to 48.3 — its lowest since September 2022 and the first contraction in eight months. Dr. Wang Zhe of Caixin Insight noted that both supply and demand deteriorated amid worsening market conditions:

• Output & Orders: Manufacturing output and total new orders both contracted, with export orders falling to their weakest since July 2023. Investment goods saw the steepest declines.

• Jobs: Employment shrank at an accelerated pace, especially among producers of investment goods.

• Prices: Input and output prices dropped further, reflecting weak demand and falling raw material costs. May marked the sixth straight month of output price contraction.

• Logistics & Inventory: Supplier deliveries faced slight delays, but inventories remained stable as companies cut back on purchases.

• Outlook: Business confidence improved slightly, with firms more hopeful about external conditions, including easing U.S.-China trade tensions.

Dr. Wang warned that downside risks to the economy have intensified in Q2, and existing stimulus measures appear insufficient. He called for targeted efforts to raise household incomes, boost employment, and improve consumer confidence to support recovery.

—

The two PMIs are quite different. If you are unfamiliar with this, the following will set you up for next year!

The PMIs (Purchasing Managers’ Indexes) from China’s National Bureau of Statistics (NBS) and Caixin/S&P Global differ primarily in survey scope, methodology, and focus. Here’s a breakdown of the key differences:

1. Provider and Affiliation

• NBS PMI:

  • Compiled by the National Bureau of Statistics of China, a government agency.
  • Seen as the official PMI, closely aligned with government policies and priorities.

• Caixin/S&P Global PMI:

  • Compiled by Caixin Media in collaboration with S&P Global.
  • A private-sector index, often considered more market-driven.

2. Survey Scope

• NBS PMI:

  • Focuses on large and state-owned enterprises.
  • Covers a broader range of industries, including manufacturing and non-manufacturing sectors (e.g., construction and services).
  • Reflects conditions in sectors heavily influenced by government policies and infrastructure spending.

• Caixin PMI:

  • Focuses on small to medium-sized enterprises (SMEs), particularly in the private sector.
  • Captures the performance of companies that are more exposed to market-driven forces and less influenced by state interventions.

3. Sample Size and Composition

• NBS PMI:

  • Larger sample size, with about 3,000 enterprises surveyed for the manufacturing PMI.
  • Emphasizes state-owned enterprises and larger companies, which tend to dominate traditional industries.

• Caixin PMI:

  • Smaller sample size, surveying around 500 enterprises, with a stronger focus on export-oriented and technology-driven firms.
  • Provides insights into the private sector and its responsiveness to global economic conditions.

4. Release Dates

• NBS PMI:

  • Released monthly, typically on the last day of the month.
  • Provides separate PMIs for manufacturing and non-manufacturing sectors.

• Caixin PMI:

  • Released a few days later, usually on the first business day of the following month.
  • Includes only the manufacturing PMI and services PMI, with no equivalent for non-manufacturing activities like construction.

5. Interpretation and Use

• NBS PMI:

  • Reflects the overall economic landscape, especially trends in industries influenced by government policy.
  • Analysts use it to gauge the impact of fiscal and monetary policies on the broader economy.

• Caixin PMI:

  • Viewed as a better indicator of the health of the private sector and market-driven segments of the economy.
  • Considered more sensitive to external shocks (e.g., global trade conditions).

6. Key Insights and Differences in Results

• The NBS PMI often reflects policy-driven stability, showing less volatility because it covers sectors cushioned by government support.
• The Caixin PMI can be more volatile, as SMEs are more sensitive to real-time changes in market demand, supply chain disruptions, and global economic shifts.

Why Both Matter:

• NBS PMI offers a macroeconomic view of China’s state-influenced economy.
• Caixin PMI provides a microeconomic perspective of the more market-driven and globally competitive sectors.

This article was written by Eamonn Sheridan at www.forexlive.com.

Reserve Bank of Australia May minutes:

• Board considered keeping rates unchanged, cutting by 25 bps or 50 bps
• Decided case for 25 bps cut was stronger one, preferred policy to be cautious and predictable
• Inflation still not at mid-point of target band, labour market still tight
• Board agreed developments in domestic economy alone warranted a rate cut
• Progress on inflation meant policy did not need to be as restrictive
• Some downside risk that domestic household consumption might not pick up
• Larger move might offer more insurance against adverse global scenarios
• US trade policy was a significant and adverse development for global outlook
• Board not persuaded that 50 bps was needed, US tariffs had not yet affected Australian economy
• Would be challenging for business, households if aggressive easing had to be reversed
• Board judged not yet time to move monetary policy to an expansionary setting
• Expansionary policy might be needed if worst of global trade scenarios eventuated
• Policy well placed to respond decisively if international devlopments warranted it

The RBA discussion of a 25 vs. 50bp rate cut is getting some attention., but they did tell us that on the day so its not a new piece of information in the minutes;

• RBA cut rates as expected, AUD falls on 50 bps debate

Reserve Bank of Australia Governor Bullock

This article was written by Eamonn Sheridan at www.forexlive.com.

Australia Company Gross Operating Profits (QoQ) registered at -0.5%, below expectations (1.1%) in 1Q

An Iranian diplomat said on Monday that Tehran is poised to reject a US proposal to end a decades-old nuclear dispute after the US draft insisted that Iran would have to suspend the enrichment of uranium inside Iran, per Reuters. 

GBP/USD jumped on Monday, kicking off the June trading window by climbing back above 1.3550 after a broad-market weakening in Greenback flows.

Chinese markets are reopening today after the holiday Monday.

The People’s Bank of China (PBOC), China’s central bank, is responsible for setting the daily midpoint of the yuan (also known as renminbi or RMB). The PBOC follows a managed floating exchange rate system that allows the value of the yuan to fluctuate within a certain range, called a “band,” around a central reference rate, or “midpoint.” It’s currently at +/- 2%.

Previous close was 7.1961

PBOC injected 454.5bn yuan via 7-day reverse repos at 1.40%

This article was written by Eamonn Sheridan at www.forexlive.com.

The USD/CAD pair remains on the defensive near 1.3715 during the early Asian session on Tuesday. The US Dollar Index (DXY) softens to fresh seven-week lows amid jitters over the health of the US economy. The JOLTs Job Openings will be published later on Tuesday. 

Reuters had this report on the response from the EU to Trump’s move to double tariffs.

In brief, the European Commission announced on Monday that it will push hard this week for the United States to scale back or scrap tariffs, despite Donald Trump’s pledge to double duties on steel and aluminium imports to 50%.

European Trade Commissioner Maros Sefcovic is set to meet U.S. Trade Representative Jamieson Greer at an OECD event in Paris on Wednesday, while Commission officials will also hold talks with their U.S. counterparts in Washington during the week.

Link here to the Reuters report for more detail.

Sefcovic

This article was written by Eamonn Sheridan at www.forexlive.com.