USD/CNH Rebounds, But CNH Still Higher On Key Crosses

CNH couldn't sustain gains beyond 6.6700 post the Asia-close. We pushed back to 6.7000 towards the NY close, in line with broader USD strength and negative Covid developments onshore. We currently track slightly above this level.

• To recap, Shanghai will conduct mass testing across 7 districts this weekend, placing the districts in temporary lockdown. Local Covid case numbers are drifting higher in both Shanghai and Beijing.
• China President Xi Jinping stated the government should adhere 'unwaveringly' to its Covid zero policy, but at the same time support the economy.
• The extent to which renewed lockdown measures impacts the economic recovery remains to be seen. Market sentiment will clearly be tested if lockdown measures persist in the Shanghai districts beyond this weekend.
• Whilst USD/CNH bounced back to 6.7000, the pair was barely unchanged over Thursday’s 24 hour period, compared to the DXY's 0.66% bounce. EUR/CNH is still down on levels compared to a week ago, while CNH/JPY is nearly 2% higher. This pair struggling to make much headway beyond the 20.00 level though, which is where we topped out in mid-April for this cross.
• Yesterday's better than expected trade data has no doubt helped, but onshore Covid developments are likely to be watched closely over the weekend.