Offshore Yuan Higher Ahead Of Trade Data

Offshore yuan finished the day higher on Monday, boosted by positive risk sentiment. USD/CNH last trades at 6.4765, brushing up against support at 6.4742 the 100-DMA, resistance is seen at the psychological 6.50 level and 6.5118 the 200-DMA.

• Markets await trade data out of China due during today's session. In yuan terms the trade surplus is expected to narrow to CNY 270bn from CNY 296bn, exports are expected to have risen 15.1% while imports are expected to have grown 20.8%. In non-yuan terms exports are expected to be 23.0% higher, while imports are expected to have risen 29.5%.
• CBA says: "We expect export growth to ease to 23%/yr because of easing new export orders in the manufacturing PMI. But we expect Chinese exports to remain resilient because of reduced competition from emerging economies which are grappling with rising virus infections."
• Citi are slightly more pessimistic: "Trade growth might slide moderately off higher base in June. The leading indicators suggest a robust momentum in China's export: Internally, the trade related cargo throughout capacity in China's major ports (including both imports and exports) grew at 10.5%YoY for the first 10 days of June, higher than the May's average at 7%YoY. Externally, the Baltic Dry Index, a lead indicator for global trade activities, rebounded in June. However, we think the Covid-19 resurgence in Guangdong province might weigh on China's exports, given its importance on exports. Together with the rising base, we expect the export growth to decelerate modestly from 27.9%YoY in May to 22%YoY in June. On the import front, Korea's first 20 days exports, a lead indicator for China's M&E imports, grew at 29.4%YoY in June, vs. 53.3%YoY in first 20 days in May. Meanwhile, the commodity and energy prices further increased in June, which would likely support the value of China's commodities imports. Altogether, we expect import growth to decelerate to 28%YoY, but still a very robust number. As a result, we estimate the trade surplus to be at US$ 44bn in June."