Redback Falters On Hawkish FOMC, Softer PBOC Fix

USD/CNH has extended its sharp move away from a fresh cycle low printed yesterday, as Asia-Pac players have caught up with the Fed's hawkish turn after their monetary policy meeting concluded Wednesday. The Fed's growing readiness to take decisive steps against rising inflation contrasts with recent rate cuts delivered by the PBOC in a bid to stimulate economic growth.

• Today's fixing of yuan reference rate may have amplified pressure to the redback. The PBOC set the mid-point of permitted USD/CNY range at CNY6.3382, 18 pips above sell-side estimate. While the miss was not particularly wide, it represented a deviation from nearly in-line fixings seen over the last few days.
• China's industrial profits rose 4.2% Y/Y in December after a 9.0% increase recorded in the prior month.
• Focus moves to China's official PMIs & Caixin Manufacturing PMI, due to hit the wires on Sunday. These will be the last releases before the week-long Lunar New Year holiday.
• Spot USD/CNH trades at CNH6.3518 at typing, 163 pips above neutral levels. Bullish focus remains on Jan 6/Nov 26 highs of CNH6.3976/99, while bears would be pleased by a sell-off below CNH6.3238, which limited losses yesterday.