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CNH: Modestly Lags Softer USD Backdrop, USD/CNH 1mth Risk Reversal Close To Flat

CNH
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USD/CNH held above 7.2800 post the Asia close on Thursday. We saw a brief spike towards 7.3000 as the Trump spoke to the World Economic Forum in Davos, but this was quickly reversed. The pair tracks near 7.2850 in early Friday dealings, having lost just under 0.10% for Thursday's session in CNH terms. This slightly underperformed the modest downtick in USD indices. Onshore USD/CNY spot finished up at 7.2862, while the CNY CFETS basket tracker was slightly lower at 100.93. 

  • USD/CNH holds close to its 50-day EMA. Thursday highs (7.2982) were fresh highs since Monday., which recent lows (7.2524) remain intact.
  • For now, markets are in wait and see mode around the tariff outlook. Trump's Feb 1 headline from earlier this week, around potential tariff imposition on China, comes in next Saturday.
  • Implied vol markets remain well off pre inauguration highs, the 1 month last around 4.85%, back close to mid Dec levels. The 1 month risk reversal is close to recent highs though, last around 0.015, so just above flat.
  • The local data calendar is empty today but on Sunday the 1yr MLF outcome is expected, with no change in the 2.0% current rate expected. Next Monday official PMIs for Jan print, along with Dec industrial profits.
  • In the cross asset space, US-CH yield differentials are up form recent lows, but more so at the back end. China equities rose yesterday but remain short of recent highs and are still well down for the year. 
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USD/CNH held above 7.2800 post the Asia close on Thursday. We saw a brief spike towards 7.3000 as the Trump spoke to the World Economic Forum in Davos, but this was quickly reversed. The pair tracks near 7.2850 in early Friday dealings, having lost just under 0.10% for Thursday's session in CNH terms. This slightly underperformed the modest downtick in USD indices. Onshore USD/CNY spot finished up at 7.2862, while the CNY CFETS basket tracker was slightly lower at 100.93. 

  • USD/CNH holds close to its 50-day EMA. Thursday highs (7.2982) were fresh highs since Monday., which recent lows (7.2524) remain intact.
  • For now, markets are in wait and see mode around the tariff outlook. Trump's Feb 1 headline from earlier this week, around potential tariff imposition on China, comes in next Saturday.
  • Implied vol markets remain well off pre inauguration highs, the 1 month last around 4.85%, back close to mid Dec levels. The 1 month risk reversal is close to recent highs though, last around 0.015, so just above flat.
  • The local data calendar is empty today but on Sunday the 1yr MLF outcome is expected, with no change in the 2.0% current rate expected. Next Monday official PMIs for Jan print, along with Dec industrial profits.
  • In the cross asset space, US-CH yield differentials are up form recent lows, but more so at the back end. China equities rose yesterday but remain short of recent highs and are still well down for the year.