It was an active session for economic data with the focus on China’s second manufacturing PMI. Last week we had the official PMIs, from China’s National Bureau of Statistics (NBS). The official manufacturing PMI stayed in contraction for its third consecutive month. On the contrary, today we got the S&P Global/Caixin China Manufacturing PMI, for June, which expanded. While it fell by 0.4 of a point from May, to 50.5, it remained in the expansion zone and beat the central estimate of 50.2.

As an aside, we also had manufacturing PMIs from Japan and South Korea. Both contracted.

There were plenty of other data points, as shown in the bullet points above. Apart from the Chinese PMI the other data of most note was the Bank of Japan Q2 Tankan survey, which improved markedly from Q1 and quarters before. As part of the Tankan publication is the Tankan price expectations survey, which indicated firms expect the CPI in Japan to remain above the BOJ 2% target for the next five years. If the BOJ ever switches to the same expectation from its current view that inflation is transitory its reasonable to expect a pivot away from ultra-loose monetary policy.

As I update USD/JPY is not showing much of a sign of this, though, its spent the session mostly ticking higher. Its not yet testing last week’s high though.

The People’s Bank of China set the onshore yuan, CNY, much stronger than expected at the daily reference rate fixing today and drained a hefty 400bn+ yuan in open market operations.

usdyen wrap chart 03 July 2023 boj tankan