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Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.
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
Source: MNI - Market News/Bloomberg
- Meanwhile, China's Caixin Services PMI plunged to 36.2 in April from 42.0 recorded in March, indicating a sharply faster rate of contraction, as restrictions implemented in line with the Covid-Zero policy took their toll.
- The actual print missed the median estimate of 40.0, extending a run of downside surprises, with Caixin flagging the "quickest fall in service sector output for over two years as COVID-19 restrictions tighten."
Fig. 2: China Caixin Services PMI - Actual vs. Estimate
Source: MNI - Market News/Bloomberg
- Spot USD/CNH trades +162 pips at CNH6.6385 following the post-PMI upswing, with bulls setting their sights on May 3 peak at CNH6.6980. Bears look for a sell-off past Apr 28 low of CNH6.5863.
Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.
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