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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
Offshore yuan extends losses after the release of China's monthly activity data, which miss expectations across the board.
- Industrial output unexpectedly shrank in April, while the contraction in retail sales was deeper than forecast. The unemployment rate rose more than anticipated, while fixed assets ( and property investment growth printed below estimates.
Fig. 1: Citi Economic Surprise Index - China
Source: MNI - Market News/Bloomberg/Citi
- The collapse in China's manufacturing production (-2.9% Y/Y in April vs. median estimate of +0.5% vs. +5.0% in March) bodes ill for other regional EM currencies, as evidenced by the strong co-movement in industrial output growth and ADXY index change over the recent months.
Fig. 1: China Industrial Production Y/Y (%) vs. ADXY Index Y/Y (%)
Source: MNI - Market News/Bloomberg
- Worth pointing out that YtD infrastructure spending growth slowed to +6.80% Y/Y in April from +8.50% prior. This comes as the Economic Information Daily reported that China could issue CNY2tn worth of special government bonds in Q2 to boost infrastructure activity.
- The data reflected the devastating impact of strict COVID-19 countermeasures implemented by Beijing. The picture painted by the report was so bleak that it outweighed headlines on the relaxation of some restrictions/another day of zero community transmission in Shanghai.
- Offshore yuan went offered earlier as the PBOC kept the interest rate applied to its 1-Year MLF operations & net liquidity unchanged, disappointing some dovish market participants.
- The surprise in the yuan fixing was very modest (7 pips) but ended a 9-session run of stronger than expected fixes.
- Spot USD/CNH trades at CNH6.8113, up 115 pips at typing. A rally above Friday's high of CNH6.8380 is needed for the resumption of the uptrend, with Sep 24, 2020 high of CNH6.8462 providing the next layer of resistance. Bears look for a retreat past the round figure of CNH6.7000, a significant resistance-turned-support level.
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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