CNH Volatility Rebounds, Trade Data On Tap Today

USD/CNH probed above 6.7500 early post the Asia close, but ran out of momentum as the USD DXY index edged lower. Dips in USD/CNH got as far as just under 6.7300, before buying interest emerged. We currently sit at 6.7380.

• Mid-June highs from around 6.7600/6.7850 remain an upside area of focus. The USD/CNH 1 month risk reversal has rebounded sharply, from recent lows around +0.50 to +1.10. Implied has also spiked, back to 6.52% from recent lows below 5%. We remain below earlier highs above 8%, seen in May and June of this year.
• Focus will remain on equity market performance. The China Golden Dragon index managed a modest +0.20% gain in NY trading. The index is still off by 9% from late June highs, likewise for the Hang Send China Enterprise Index. Mainland indices have seen more modest falls, but negative trends are still evident.
• Covid trends will be watched closely, with some signs of softening in high frequency indicators like metro rail traffic in Shanghai.
• On the data front, June trade data prints today. Exports are expected to ease to 12.5% YoY from 16.9% previously, while imports are expected to edge down a touch to 4.0% from 4.1% last month. The trade surplus is forecast at $76.80bn, from $78.76bn last month.
• Also note, the 1 yr MLF rate is due between now and the end of the week. The market expects the rate to be left unchanged at 2.85%, albeit with less rolled over (100bn yuan expected versus 200bn yuan previously).