Offshore Yuan Looks Past Activity Indicators

Retail spending held up relatively well and the unemployment rate dropped more than expected in June, providing a sweetener to the bitter Q2 GDP report, with output growing slower than forecast. Industrial production fell roughly in line with estimates. Offshore yuan has shown little to no reaction to the data.

• The NBS struck some downbeat tones in its commentary on the latest activity indicators. The Bureau warned that global stagflation risks have risen, the impact of COVID-19 on the economy has not been fully eliminated, while the foundation for a sustained economic recovery are not yet solid.
• Activity data overshadowed the latest survey on new home prices, which fell 0.10% M/M nationwide. Home prices have been steadily declining since September 2021, when they registered the first monthly fall since 2015.
• Elsewhere, the PBOC opted against injecting funds into the financial system via 1-Year MLF, keeping the interest rate applied to the operations unchanged at 2.85%.
• The PBOC fix was marginally weaker than expected. The 7-pip deviation from analysts' median estimate was not enough to affect price action to any noticeable degree
• Spot USD/CNH trades at CNH6.7532, down 80 pips on the day. Bears need a fall through Jun 15 low of CNH6.6669 before targeting Jun 3 low of CNH6.6170. Bulls look for a bounce above yesterday's high of CNH6.7918 before taking aim at May 13 high of CNH6.8380.