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CNH Underperforms Following PBOC, BOE Peak Rate Pricing Underpins GBP

FOREX
  • The Chinese Yuan has traded poorly on Tuesday, following both the weaker than expected activity data and the PBOC unexpectedly cutting two key policy rates for a second time in three months. This has propelled USDCNH (+0.53%) to trade above 7.30 for the first time since November 2022, reaching as high as 7.3311 in early US trade.
  • GBP has been moderately outperforming on Tuesday, underpinned by BoE peak rate pricing creeping higher on this morning's higher than expected employment and average weekly earnings data. GBPUSD upside first targets 1.2775, the 50-dma.
  • Overall, the USD index trades just a touch lower on the session, despite receiving a brief boost following the higher-than-expected retail sales data. A much weaker empire manufacturing negated much of the initial positivity. This was most noticeable for USDJPY which after printing just 5 pips shy of session highs at 14587 following the data, sold off consistently to fresh intra-day lows of 145.11 before then bouncing ahead of the APAC crossover.
  • Importantly, the pair has cleared resistance at 145.07, the Jun 30 high, confirming a resumption of the uptrend and maintaining the bullish price sequence of higher highs and higher lows. Moving average studies are in a bull mode condition, highlighting an uptrend. The focus is next on 146.38, a Fibonacci projection.
  • The RBNZ is unanimously expected to keep rates at 5.5% at its meeting on Wednesday. This is a statement meeting and will include revised forecasts and the focus will be on the expected paths for inflation and the OCR. UK July CPI will highlight Wednesday’s European docket, before Eurozone GDP crosses the wires. The latest set of FOMC minutes will also be published later in the session.
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