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CNH: CNH Recoups Half Of Wednesday's Losses, Post NPC Outcome In Focus

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USD/CNH intra-session lows from Thursday were at 7.1415. We track slightly firmer in early Friday trade, last near 7.1550. CNH gained 0.77% for Thursday's session, unwinding around half of Wednesday's US election inspired losses. The pair briefly dipped sub the 100-day EMA (near 7.1460), while the 200-day is higher, close to 7.1685. USD/CNY spot finished up at 7.1434. Despite underperforming some of the major FX moves the CNY CFETS basket was little changed at 98.845 for Thursday. 

  • CNH benefited from broader USD softness, particularly amidst the US yield pull back. The Fed cut 25bps as expected, while Powell's presser was deemed to have lent dovish.
  • Focus today will rest on the USD/CNY fixing, with yesterday's neutral result weighing on yuan sentiment in early dealings. Reported state bank USD selling onshore helped calm sentiment.
  • China exports also surprised meaningfully on the upside. The Citi China economic surprise index is now at multi month highs, see the chart below.
  • Yesterday's equity strength, the CSI 300 up just over 3%, was another yuan positive. The index is now back to early Oct levels. In US trade on Thursday the Golden Dragon index rose 3.50%.
  • Stimulus hopes at the conclusion of today's NPC meeting are firmer, with some chat around extra stimulus given the likely Republican clean sweep at this week's elections. So far the focus appears to be on easing the local government debt burden and it remains to be seen what extra stimulus measures will be announced.  

Fig 1: China CITI EASI 

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USD/CNH intra-session lows from Thursday were at 7.1415. We track slightly firmer in early Friday trade, last near 7.1550. CNH gained 0.77% for Thursday's session, unwinding around half of Wednesday's US election inspired losses. The pair briefly dipped sub the 100-day EMA (near 7.1460), while the 200-day is higher, close to 7.1685. USD/CNY spot finished up at 7.1434. Despite underperforming some of the major FX moves the CNY CFETS basket was little changed at 98.845 for Thursday. 

  • CNH benefited from broader USD softness, particularly amidst the US yield pull back. The Fed cut 25bps as expected, while Powell's presser was deemed to have lent dovish.
  • Focus today will rest on the USD/CNY fixing, with yesterday's neutral result weighing on yuan sentiment in early dealings. Reported state bank USD selling onshore helped calm sentiment.
  • China exports also surprised meaningfully on the upside. The Citi China economic surprise index is now at multi month highs, see the chart below.
  • Yesterday's equity strength, the CSI 300 up just over 3%, was another yuan positive. The index is now back to early Oct levels. In US trade on Thursday the Golden Dragon index rose 3.50%.
  • Stimulus hopes at the conclusion of today's NPC meeting are firmer, with some chat around extra stimulus given the likely Republican clean sweep at this week's elections. So far the focus appears to be on easing the local government debt burden and it remains to be seen what extra stimulus measures will be announced.  

Fig 1: China CITI EASI 

Keep reading...Show less