Comment by Aureliano Gentilini, Head of Research, STOXX Ltd.
“Monetary policy decisions on the other side of the Atlantic will capture investors’ attention in the coming months. At the same time, implications arising from PBOC’s devaluation of the yuan will be closely watched and are expected to remain on investors’ radar. Risk-on-off drivers and volatility patterns triggered by contagion risks and information flows are expected to weigh on portfolio allocation decisions in the short run. Once again, the current and expected scenarios appear to favour allocations to minimum-variance portfolios, with a view to a longer-term investment horizon."
“More than on Federal Reserve’s interest rate tightening decisions, we have the opinion that the yuan devaluation will weigh on Bank of Japan’s (BOJ) monetary stance. In particular, given the relatively higher weighting of the yuan in the Japan’s trade weighted index, we expect that a larger monetary base expansion will be launched by the BOJ, should the yuan continue featuring a depreciation pattern.”
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