Recap : EUR inflation & ECB, CNY fix vs CNH


A few interesting items:

First, following the weak German inflation prints, the EUR 5y5y forward inflation is back at the lows from earlier this year. If they stay here or break lower, there is likely a significantly higher chance of some sort of action from the ECB next Thursday. The market has responded to this somewhat – the Euribor white pack rallied ~3bps today. (side note – there are probably some room for nefarious participants to affect markets here. The inflation market is much smaller and less liquid than the money markets, but is now a key input for the ECB, given how far away spot inflation is from their inflation target. A nefarious player could potentially use the inflation market to affect ECB policy, and hence money market rates!)

In RMB space, note that CNY has been fixing consecutively lower for a while. (h/t Steve) In fact, the rolling 10 day rate of change (green) is now negative for the first time since early February, when the depreciation trend really started:

However, USDCNH (white) has continued to rally even though the fix (orange) has been stabilizing:

I noted the likelihood of a lower CNY fix – and lower USDCNH – on 4/16, so the divergence is surprising. If any readers have a view on the continued divergence – please share!

Finally, here’s a very interesting piece on valuing internet businesses via monthly active user:

Note that even iTunes can only generate revenue (not profits!) per user of just ~$9, with a 700mm user base. So the next time you see a tech company valuation based on the number of users, remember those figures.


  • US Consumer Confidence was stable at 82.3 vs 83.2 exp
  • Germany Gfk Consumer Confidence was stable at 8.5 as exp
  • France Consumer Confidence declined to 85 vs 88 exp and prev
  • UK GDP +0.8% q/q versus +0.9% expected. +3.1% y/y vs +3.2% expected.
  • ECB Stress Test Parameters: rates @ 4%, GDP -3.5%, UER @ 12%, House Prices -35%. T1 Capital >=4.5% of RWA. Results published in 4Q.
  • BoE Stress Test Parameters: 2y recession, GDP negative for 2 years, UER @ 13%, House Prices -20%. T1 Capital >= 5.5% of RWA. Banks will have 6-9 months to raise capital if they fail. Results expected in Oct.
  • The Senate Banking Committee beginning Tuesday will take up a bipartisan bill that so far has attracted the most support from lawmakers from both parties. It would replace Fannie and Freddie with a new system by which private firms could issue mortgage-backed securities and purchase federal insurance. Private investors would be required to take initial losses before government guarantees would kick in. – WSJ Note that the 50bp rise is actually quite substantial. 30y Fixed rates are currently 4.26%, so a 50bp rise decreases affordability by ~12%.

Upcoming Data:

  • Tue: UK GfK Consumer Confidence, Japan PMI, NZ Business Confidence
  • Wed: Month End, Turkey Trade Balance, EU CPI, South AfricaBalance, US ADP Employment, CanadaGDP, US GDP, Chicago PMI, Australia PMI
  • Thu: UK PMI, Yellen Speaks, Jobless Claims, PCE, ISM Mfg, Japan Employment
  • Fri: ItalyPMI, US Employment, China Non-mfg PMI,
  • Mon: AustraliaBuilding Approvals, China HSBC Mfg PMI, ISM Non-Mfg PMI, AU Trade Balance
  • Tue: RBA, EU Services PMI, NZ Unemployment, Australia Retail Sales, China HSBC Services PMI

2 thoughts on “Recap : EUR inflation & ECB, CNY fix vs CNH

  1. Funny, both housing and nuclear plant new build would be dead with out fed support and most people would only view one of those as high risk.

Comments are closed.