USD/CNH Respects Recent Ranges, Continued Focus on Stimulus Measures

USD/CNH once again found a base following yesterday's sharp dip. We briefly touched sub 6.6700, but spent most of the post Asia close recovering. We are back around 6.6900 currently.

• Broadly, USD/CNH continues to respect well-worn ranges. 1 month implied vol is back sub 7%, which is towards the bottom end of the range since we broke higher through April (the rough range over this period is 6.50-8.00%).
• Yesterday's sharp break lower in USD/CNH didn't appear fundamentally driven, although there was focus on the story around 'extraordinary' stimulus the curb downside risks to the investment outlook.
• More cities in China are also looking to support the ailing property sector. Recent announcements have been made by Zhengzhou and Wenzhou around purchase vouchers and lowering down payments for first home buyers.
• A Bloomberg measure of China developers rose by nearly 5% yesterday, although we are coming from a low very base (-50% since 2020 peak).
• These measures to support the property sector look more micro rather than macro based, and the market may be looking for something more broad based from an easing standpoint to drive a sustainable turnaround in the property sector.
• The consensus forecast for China growth continues to edge down as well, now at 4.3% for 2022, down from 5.2% in March.
• Still, we continue to see the China equity outperformance theme at an aggregate level. This is likely aiding CNH sentiment, particularly with clouds still over the domestic economic outlook.