Global Liquidity Surge: China's Policy Shift and Promising Market Signals

Global Liquidity on the Rise

‍Today, China made headlines by announcing looser monetary conditions.

Given the ongoing deflationary pressures weighing down its economy, this move isn’t really a big surprise.

While many are reacting with "Finally, China is making a move," the reality is that China has already been injecting liquidity for some time before this announcement was made.

The key takeaway here is that this policy shift could open the door for larger liquidity injections in the near future.

For comparison, the last time China adopted a 'moderately loose' monetary policy was during the aftermath of the global financial crisis in 2008 - a point worth keeping in mind.

We're expecting China to take big actions now that this announcement has been released.

Meanwhile the MOVE Index has corrected downward, improving collateral multiplier and subsequently boosting global liquidity.

Shifting focus to the West, the Federal Reserve’s bank credit has shown a notable increase in its RoC over the past three weeks.

This suggests that the Fed has been tightening far less aggressively compared to earlier periods.

Data-wise, our GLI has risen by +$1.946 trillion, reflecting a 1.49% increase.Interestingly enough, the 3M RoC has rebounded before touching the 12M RoC-a promising signal of sustained positive liquidity momentum.

Looks like we’ll even get early Christmas gifts from the markets again