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USD/CNH Lower In Line With DXY Trend

CNH

USD/CNH dipped sub 6.7500 briefly on Friday during the NY session before rebounding back above 6.7600. We currently track around 6.7630, little changed since the start of the session.

  • To recap, weekend developments were focused on the potential Pelosi visit to Taiwan and what that could mean for US-China relations. The US administration appears somewhat divided over the trip, following comments late last week from Biden which indicated the US military had advised against the trip.
  • Onshore further covid testing will take place in Shanghai this week. We noted last week that metro rail traffic volumes in the city remained below Jan/Feb levels form this year.
  • The property sector will also be in focus with Evergrande CEO and CFO resigning at the end of last week. The company has stated previously that it was on track to deliver a restructuring plan by the end of July.
  • There is no data out today, with industrial profits due to print on Wednesday. The main focus though will be on PMI prints though for July, which start printing this Sunday.
  • In the vol space, things remain fairly benign. The 1 month implied sits within recent ranges, at 6.60%, well down from +8% highs from earlier in the year. The risk reversal is at +1.30, down from recent highs of +1.46.
  • All in all, the market doesn’t appear to be expected a sharp USD/CNH move through 6.8000, which is line with the DXY moving off its highs last week.
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USD/CNH dipped sub 6.7500 briefly on Friday during the NY session before rebounding back above 6.7600. We currently track around 6.7630, little changed since the start of the session.

  • To recap, weekend developments were focused on the potential Pelosi visit to Taiwan and what that could mean for US-China relations. The US administration appears somewhat divided over the trip, following comments late last week from Biden which indicated the US military had advised against the trip.
  • Onshore further covid testing will take place in Shanghai this week. We noted last week that metro rail traffic volumes in the city remained below Jan/Feb levels form this year.
  • The property sector will also be in focus with Evergrande CEO and CFO resigning at the end of last week. The company has stated previously that it was on track to deliver a restructuring plan by the end of July.
  • There is no data out today, with industrial profits due to print on Wednesday. The main focus though will be on PMI prints though for July, which start printing this Sunday.
  • In the vol space, things remain fairly benign. The 1 month implied sits within recent ranges, at 6.60%, well down from +8% highs from earlier in the year. The risk reversal is at +1.30, down from recent highs of +1.46.
  • All in all, the market doesn’t appear to be expected a sharp USD/CNH move through 6.8000, which is line with the DXY moving off its highs last week.