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Growth Downgrades And Policy Bias Underscore Headwinds

CNH

CNH is on track to record its firstly weekly gain vs. the USD in 7 weeks. However, this is all due to broader USD weakness, with domestic challenges/policy divergence still underscoring the headwinds for the currency.

  • This week's much weaker than expected China data has seen the Citi economic surprise index plunge, see the first chart below.
  • A number of sell-side economists have cut their full year Chinese growth forecasts as a result. Standard Chartered, Citi and Goldman Sachs pushed their projections down to the low 4% region for '22 GDP growth. Previous estimates were 4.5-5.0%.
  • While the covid situation appears to be gradually improving on the ground in China, there is scope for setbacks and the zero-covid stance suggests a rapid return to normal activity levels is unlikely.

Fig 1: Citi Economic Surprise Index Falls Sharply, Prompting Growth Downgrades

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CNH is on track to record its firstly weekly gain vs. the USD in 7 weeks. However, this is all due to broader USD weakness, with domestic challenges/policy divergence still underscoring the headwinds for the currency.

  • This week's much weaker than expected China data has seen the Citi economic surprise index plunge, see the first chart below.
  • A number of sell-side economists have cut their full year Chinese growth forecasts as a result. Standard Chartered, Citi and Goldman Sachs pushed their projections down to the low 4% region for '22 GDP growth. Previous estimates were 4.5-5.0%.
  • While the covid situation appears to be gradually improving on the ground in China, there is scope for setbacks and the zero-covid stance suggests a rapid return to normal activity levels is unlikely.

Fig 1: Citi Economic Surprise Index Falls Sharply, Prompting Growth Downgrades

Keep reading...Show less