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Another Downside Surprise On USD/CNY Fix, Another Miss In Services PMI

CNH

USD/CNY fix once again surprises to the downside but a considerable miss in China's Caixin Services PMI counters its impact on offshore yuan.

  • The USD/CNY fix came in weaker than market expectations once again: CNY6.5672 actual, versus CNY6.5699 expected, so a downside surprise of -27pips. This follows the downside surprise from last week (Thurs and Fri) of -36 and -37pips respectively. So for the last 3 sessions the cumulative downside surprise is -100pips, the largest downside run since early 2020.
  • This clear bias from the authorities may act as a cap on USD/CNH in the near term, particularly coupled with a less hawkish Fed than feared (i.e. no 75bps hikes at this stage). As we noted yesterday though, the medium term fundamentals are still skewed higher in the pair.

Fig. 1: USD/CNH vs. Daily Fixing Error

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USD/CNY fix once again surprises to the downside but a considerable miss in China's Caixin Services PMI counters its impact on offshore yuan.

  • The USD/CNY fix came in weaker than market expectations once again: CNY6.5672 actual, versus CNY6.5699 expected, so a downside surprise of -27pips. This follows the downside surprise from last week (Thurs and Fri) of -36 and -37pips respectively. So for the last 3 sessions the cumulative downside surprise is -100pips, the largest downside run since early 2020.
  • This clear bias from the authorities may act as a cap on USD/CNH in the near term, particularly coupled with a less hawkish Fed than feared (i.e. no 75bps hikes at this stage). As we noted yesterday though, the medium term fundamentals are still skewed higher in the pair.

Fig. 1: USD/CNH vs. Daily Fixing Error

Keep reading...Show less