USD/CNH Holding Above 7.2100, Both 1yr & 5yr LPRs Expected To Fall

USD/CNH got above 7.2150 post the Asia close on Monday, but tracked recent ranges. We start Tuesday trade near 7.2120. Monday lows in the pair came in just under 7.2050. USD/CNY finished up near the 7.1980 level. Broader USD sentiment was close to steady, as US markets were out for a holiday. The CNH ended Monday trade little changed.

• Focus today will be on whether the 5yr LPR rate is cut. The market consensus is for a 10bps cut in the rate to 4.10% from 4.20%. There is already 10 economists surveyed by Bloomberg though. Some see risks of a deeper cut to 4.05%, while some see no change.
• The 1yr LPR is expected to see a 5bps cut to 3.40%. Again though there are a range of estimates, with the low end at 3.30%, while a number of forecasters also look for a 10bps cut to 3.35%.
• Outside of this, the focus will be on local equity trends. Onshore markets gained over 1.1% yesterday for the CSI 300 and +1.5% for the Shanghai Composite. There was still speculation of support from the 'National Team' though, based of ETF activity. Northbound Stock Connect flows were strongly negative though at -6.4bn yuan.
• Headlines crossed late yesterday from the financial regulator that they will 'proactively' roll out policies to boost confidence (see this link). This followed Sunday's State Councill meeting and comments from the Premier.
• Finally, some sell-side analysts cautioned that better holiday travel/spending trends aren't necessarily a sign that the economy is turning the corner (see this link).