No Tariff News, Covid Trend Worsens, But CNH Still Resilient

USD/CNH dipped sub 6.6900 late in the NY session on Friday, spending much of the post-Asia close tracking lower. We closed around 6.6860 and are slightly higher in trade today, last at 6.6870.

• CNH maintained its outperformance against both G10 FX last week and the rest of the EM Asia FX bloc.
• In terms of weekend developments, there was still no tariff news, with US President Biden stating that action is still being discussed. The US Commerce Secretary said separately yesterday that a decision was expected shortly.
• On the Covid front, Shanghai reported its first case of the BA.5 sub-variant yesterday. Case numbers remain around recent levels, of just under 60 per day. The city will carry out mass testing between July 12 to the 14th in 9 districts. Elsewhere, Haikou, the capital of Hainan entered a lockdown yesterday, while Macau will shut most businesses for a week starting from today.
• June inflation data also printed on Saturday. To recap, both CPI and PPI came in stronger than expected. CPI was boosted by higher food inflation to 2.5% YoY, versus 2.4% expected and 2.1% previously. Core inflation remains fairly benign though at 1% YoY, from 0.9% last month. PPI was 6.1% YoY versus 6.0% expected.
• The data calendar remains busy this week. Aggregate finance/new loans expected sometime this week. Wednesday delivers trade data, while Friday sees Q2 GDP and the monthly data run (see our bullet from last week for more details).
• We will also watch the CNY fixing today, as the trend has shifted to a modestly weaker bias in recent weeks.