CNH Bounce Proves Short-Lived

USD/CNH's dip sub 6.6700 late in yesterday's Asia session proved to be very short lived. We got close to 6.7150 overnight, before settling back down to 6.7050. We currently track around 6.7025.

• To recap, China has announced a halving of quarantine time for inbound travellers and close contacts of Covid patients domestically.
• The domestic shift could help see consumption/services rebound, although China officials noted the announcement wasn't a shift in its Covid policy.
• Of course, a stronger domestic recovery would trim China's external trade surplus position via higher imports. Commodities like iron ore bounced on this news, while oil prices continued to recover.
• Additionally, any increase in outbound travel from China could also bring back the services trade deficit. Outbound travel remains very low compared to 2019 levels.
• Such developments would be less supportive for CNH, all else equal and is a likely factor in CNH's short-lived bounce late yesterday post the Covid quarantine announcement.
• Elsewhere, geopolitical tensions have firmed. NATO is expected to label China a 'systemic challenge' when it releases it strategic outlook later this week. Meetings this week have been attended by leaders from South Korea and Japan.
• The China Golden Dragon Index fell overnight, in line with broader tech weakness. The index fell by 1.45%. Domestic related stocks should still be supported today.
• Note USD/CNH's 50 day MA comes in at 6.6911, while there is no domestic data today, with tomorrow's PMIs in focus.