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Data Provoke Limited Reaction Despite Slowdown In Retail Sales Growth

CNH

Spot USD/CNH has wavered this morning, eventually landing in negative territory, with all eyes on local data releases. The rate last trades -27 pips at CNH6.3714. Bears need a sell-off past Dec 8 low of CNH6.3305 to gain some fresh momentum, while bulls look to a move through Dec 10 high of CNH6.3893 towards the 50-DMA at CNH6.3938.

  • The yuan shows muted reaction to the release of China's November economic activity indicators, which were a tad worse than anticipated. Industrial output rose marginally faster than expected but retail sales growth slowed more than forecast. Fixed assets and property investment missed expectations by a narrow margin, while the unemployment rate unexpectedly edged higher to 5.0% from 4.9%.
  • The decline in China's new home prices accelerated in November amid ongoing crisis in the local real estate market. Headline figure fell 0.33% M/M after a 0.25% dip recorded in October. As a reminder, September saw the first dip in home prices since 2015.
  • Earlier, the PBOC rolled over CNY500bn of MLF operations, leaving the rate unchanged at 2.95%. In conjunction with the maturing of CNY950 of MLF loans, this meant a net drain of CNY450bn. Note that the RRR cut announced last week takes effect today and the PBOC said that banks will use part of the unlocked funds to pay back maturing MLF loans.
  • Worth noting that the HKMA said that the PBOC will sell CNH5bn 6-month bills in Hong Kong next week.
  • The yuan fix was uneventful again, with the reference rate set just a handful of pips above sell-side estimate.
  • Meanwhile, Sino-U.S. tensions continue to simmer, with the Uyghur Bill winning the approval of the House of Representatives. Separately, BBG reported that the White House mulls tougher sanctions on China's flagship chipmaker Semiconductor Manufacturing International.

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