In our “Nugget series” we aim at visualizing the most important themes in global macro with a few timely charts and very few words.

Today we will explain the market moves of the day with our “PBoC doom loop”.

Today’s market in short: A rebound in CNY after intervention above 7.30 against the USD, a sharp move higher in USDJPY and higher USD rates. It sounds like the PBoC doom-loop at work to us.

Introducing the PBoC doomloop
The PBoC may intervene in USD markets by off-loading some of the $830bn USTs at hand, but ultimately they are likely going to make matters worse as the gravitational force of rates spreads continues to pull up USDCNY.

Chart 1: The PBoC doom loop