The Chinese State Council said in July it wants financial institutions to reduce fees and make profits, and benefit enterprises and people. The authority hinted that the People’s Bank of China could boost lending to businesses, including by cutting the amount of money banks need to hold in reserve, or RRR. The move raised prospects about easing monetary policy in China and increased concerns over a slowdown in the second largest economy. On May 31st 2021, the PBoC increased the FX reserve requirement ratio for financial institutions to 7% from 5%, aiming to freeze the yuan appreciation after it touched a 3-year high. The cash reserve ratio for big banks however, remained at 12.5%.

350K people are expected to have claimed for unemployment benefits in the latest week, slightly less than 364K in the previous week, and pointing to a continuing labour market recovery. That would be a new pandemic low figure, although initial claims remain almost the double of the 200K levels before the coronavirus pandemic. Also, employers across the country have been complaining about the struggle to fill open positions, citing ongoing labor shortages due to enhanced benefits, concerns about contracting COVID-19 and finding childcare. Continuing claims are expected to fall to 3.335 million from 3.469 million.

The Australian Dollar fell to below 0.745 this week, the weakest since early December as monetary policy differences between the Reserve Bank of Australia and the Federal Reserve become more apparent. The RBA is set to taper bond buying to a weekly pace of A$4 billion after September from the current A$5 billion to provide monetary support the economy needs as it transitions from the recovery to expansion phase. Meanwhile, the Fed is not ready yet to provide a timeline to scaling back asset purchases as conditions have not met the “substantial further progress ”, the latest meeting minutes showed. There is also the chance of further downside momentum, as the Australian recovery may be put in question as COVID-19 infections caused by highly infectious Delta variant are rising and new lockdowns are being imposed.

Gold traded at 3-week highs above the $1,800 per ounce mark, extending gains for the 7th consecutive session as lower treasury yields and the spread of the more virulent Delta variant more than offset dollar strength. The US Federal Reserve meeting minutes showed that substantial further progress on the economic recovery was generally seen as not having yet been met, though progress was expected to continue. The 10-year US Treasury yield fell to 1.28%, the lowest since February while the greenback held near 13-week highs.

Natural rubber futures extended losses to 217 yen per Kg, the lowest since October 2020 dragged down by concerns about Chinese demand, automotive supply chain disruptions in the US, and surging Covid-19 infections globally. Meanwhile, the Association of Natural Rubber Producing Countries recently estimated that the world production of natural rubber in 2021 is anticipated to grow at 5.8%, year-on-year, to 13.812 million tonnes; while world demand is estimated at 6.7% growth to 13.679 million tonnes in the same reference period.

Bank Negara Malaysia left its key overnight policy rate unchanged at a record low of 1.75 percent on July 8th 2021, in line with expectations, as policymakers warned the balance of risks to the growth outlook remained on the downside. The monetary policy committee noted better-than-expected levels of economic activity during the first quarter, including April, but said the re-imposition of nation-wide lockdowns to curb the spread of the coronavirus will dampen the growth momentum. The central bank added that favorable external demand conditions, the digital economy, and the allowances for firms to continue operating, albeit at a reduced capacity, will continue to support growth. Finally, policymakers said the spike in headline inflation was temporary and mainly driven by baseline effects. Additionally, inflation was projected to reach the lower bound of the forecast range in 2021, while core inflation was expected to average between 0.5%-1.5% amid spare capacity in the economy.

Brent crude futures declined for a 3rd consecutive session to $72 a barrel on Thursday, off 2018 highs of $77 touched early in the week as investors continue to worry that OPEC+ will not get any deal on output extension and countries would start to release crude independently. The cartel still has to set a date for their next oil policy meeting after divergences between Saudi Arabia and the UAE over the extension of oil output. Meanwhile, API data showed crude inventories in the US fell for the 7th consecutive session, down by 8 million.

The German trade surplus widened to EUR 12.3 billion in May of 2021 from EUR 7 billion a year earlier. Exports surged 36.4 percent year-on-year to EUR 109.4 billion and imports increased 32.6 percent to EUR 97.1 billion. Exports to the EU countries were up 43.3 percent and imports 38.1 percent, of which exports to the Euro Area 40.2 percent and imports 36.9 percent. Sales to countries outside the European Union increased 28.7 percent, of which China (17.1 percent) and the US (40.7 percent). Imports gained 26.5 percent, namely from the US (32.6 percent) while purchases from China declined 4.4 percent.

The Swiss unemployment rate declined to a non-seasonally adjusted 2.8 percent in June 2021, the lowest since February 2020, from 3.1 percent in the previous month, and below market consensus of 2.9 percent, as the number of unemployed people fell by 11,145, or 7.8 percent, to 131,821. Meantime, the youth unemployment rate, measuring job-seekers between 15 and 24 years old decreased to 2.2 percent from 2.4 percent, with the number of young unemployed falling by 991, or 7.8 percent, to 11,763. Adjusted for seasonal factors, the unemployment rate edged up to 3.1 percent in June, from 3.0 percent in the previous month.