Cross Asset Trends Still Point To USD/CNH Dips Being Supported

USD/CNH has been supported on dips in the first part of Friday trade, albeit with some degree of volatility. Earlier lows were at 7.2335, but we sit back at 7.2560 in latest dealings around session highs. The earlier dip came after a strong onshore spot open. USD/CNY spot got to 7.2293, but now sits higher at 7.2465/70, little changed for the session.

• Cross asset moves still point to yuan headwinds. Headlines have crossed of the 10yr CGB bond yield hitting a fresh record low (per BBG), now sub 2.20%.
• This is keeping US-CH yield differentials close to recent highs, despite Fed easing expectations. 2yr +292bps, the 10yr at +206bps.
• On the equity side, fresh rounds of stimulus aren't providing meaningful gains at this stage. The CSI 300 is close to multi month lows getting back to February. Additionally, the China to Global equity ratio has remained depressed, despite some sharp falls in global equities this past week.
• Tomorrow we get June industrial profits but greater focus will rest on Wednesday's July PMI outcomes. Market expectations for 2024 GDP growth are under 5% (albeit up from earlier 2024 lows). This week's flash PMI readings on the manufacturing side for other major economies have generally been softer.
• For USD/CNH, yen trends will obviously be important, with next week's BoJ meeting coming into focus.
• Levels wise, Thursday intra-session lows were 7.2032, while current levels are close to the 100-day EMA. The 50-day is higher at 7.2724.