USD/CNH Rises On RRR Cut & EUR Weakness, MLF & August Activity On Tap

USD/CNH remained mostly on the front foot post the Asia close on Thursday. We saw a spike higher post the authorities announcing a 25bps RRR cut, in the latest efforts to boost growth. The pair got close to 7.2975, with EUR weakness also weighing, before pulling back in NY trade. We finished the session near 7.2900, a CNH loss of 0.25% (the first for this week). USD/CNY finished close to 7.2790, while the CNY NEER (J.P. Morgan index) was near flat at 122.82.

• Whilst the timing of the RRR cut may have been a little earlier than some in the market expected, it still formed part of the broader consensus thinking and calls for the cut had been highlighted by onshore media recently.
• As our London team noted yesterday, the market may speculate the timing of the RRR cut is telling something about today's risk events. August monthly economic activity data and the latest MLF operations will cross today (see this link here).
• The PBoC noted that the RRR move aims to “consolidate the foundation of economic recovery and keep ample liquidity.” (see this link for more details).
• Of course, the move could also be simple about aiding the broader economic backdrop as we progress into Q4.
• In the equity space, the Golden Dragon index rose 0.97% in Thursday US trade. To recap, the CSI 300 finished down 0.08% in onshore trade yesterday.