USD/CNH Briefly Shows Through CNH7.20, Calls For More Meaningful Policy Support Grow

MNI (London) - Chinese-state owned media outlets (citing analysts and policy advisors) have aired a notable amount of opinions surrounding the need for further/meaningful policy stimulus in recent days, while reports have done the rounds flagging a senior CCP official meeting with other political parties to discuss policy suggestions re: reigniting Chinese consumption.

• The policy easing delivered thus far has been deemed disappointing, particularly as expectations surrounding a more forceful cut in the 5-Year LPR fixing (to support the property sector) were not matched, while meaningful fiscal support has not been forthcoming.
• This has resulted in fresh pressure for Chinese equities this week, with disappointment in the wake of Friday’s State Council meeting exacerbating matters.
• Still, Northbound Stock Connect flows have not seen notable net withdrawals from mainland holdings during the move away from last week’s highs (in index terms).
• The CNH has also seen pressure after some relief at the back end of last week. That has allowed USD/CNH to briefly show above CNH7.2000, threatening a close above the upper boundary of the well-defined uptrend channel (CNH7.1899 today).
• 10-Year CGB yields and 5-Year IRS rates were incrementally lower today, but still operate off of last week’s post-ZCS lows.

Fig. 1: USD/CNH

Source: MNI - MArket NEws/Bloomberg