USD/CNH Back Above 50-Day MA, As Covid Concerns Linger

USD/CNH continued to push higher post the Asia close. We got above 6.7260, which is just shy of the July 1 high of around 6.7270. Beyond that is the June 22nd high of just above 6.7340. We currently sit at 6.7225.

• There was a sharp pull back in the China Golden Dragon index overnight, the bourse falling just over 7%. This followed losses for onshore equities yesterday, with moves between -1 to -2%.
• Renewed covid concerns, coupled with some uncertainty around the tech regulatory backdrop, after recent fines were announced, weighed on sentiment. Some analysts have stated the fines shouldn't be seen as a negative though and that this is not the start of a fresh crackdown on the likes of Alibaba and Tencent.
• We also had China credit data print much stronger than expected late yesterday. To recap, aggregate finance rose by 5170bn yuan in June, well above estimates of 4200bn yuan. New loans rose by 2810bn yuan, versus 2400bn yuan expected.
• The credit impulse is definitely on the improve, the 6 month rolling sum of aggregate finance is now over 20000bn yuan. We are +50% above levels from 6 months ago.
• The lack of positive impetus to broader risk assets, reflects renewed China Covid fears, particularly in Shanghai. Case numbers and restriction measures will continue to be watched closely.
• USD/CNH is back above its 50-day MA, which comes in at 6.7104 today. Equity outperformance is waning against the rest of the world. Still, CNH is not falling as rapidly against the USD compared to EUR and JPY.