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Offshore Yuan Consolidates Losses After Release Of Caixin PMI

CNH

Spot USD/CNH caught a bid in the lead-up to the release of Caixin M'fing PMI, consolidating these gains thereafter.

  • Caixin M'fing PMI improved to 48.1 in May from 46.0 recorded in April, missing Bloomberg median estimate of 49.0. This means that contraction in the sector slowed, but not by as much as expected.
  • The Caixin survey came out on the heels of official data published Tuesday. Official figures surprised on the upside for both m'fing and non-m'fing, even as both indices remained in contractionary territory.
  • Note that the methodologies for Caixin and official surveys differ. Caixin PMI mainly captures small, private-owned businesses, while official data uses a larger sample of generally bigger, state-owned enterprises.
  • Caixin M'fing PMI remaining in contractionary territory is testament to the headwinds faced by the SME sector on the back of local COVID-19 outbreaks and associated containment measures, a focus point for Chinese policy makers.
  • Overall, the data lacked the kind of surprises that could either shake market confidence or provide a notable optimistic surprise.
  • Spot USD/CNH trades at CNH6.6912, up 125 pips at typing. The key bullish target is provided by CNH6.7856, the high print of May 27. A break here would suggest that a double bottom pattern is crystallising. Conversely, bears need a sell-off past May 30/23 lows of CNH6.6552/6.6479 to regain the upper hand.

Fig. 1: China Caixin vs. Official Manufacturing PMI

Source: MNI - Market News/Bloomberg

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