USD/CNH Above 6.9200

USD/CNH is above 6.9200, making sharp gains in the first part of trading this morning. The first break came in above 6.9000 but losses for CNH accelerated from there. This is fresh 2 year highs in USD/CNH. Like other majors, relief for the CNH was brief during the overnight session on Friday. Dips below 6.8600 were supported. Fresh CNH weakness today is very much in line with trends for the majors, the currency has weakened a further 0.4% against the USD, versus a 0.35% gain for the DXY since Friday closing levels.

• The focus again today will be on the CNY fix, although the market continues to use any USD/CNH dips as a buying opportunity. Recall last week we had some much stronger than expected CNY fixings (a cumulative -216 pips in USD/CNY terms for last week).
• We would expect rhetoric from the China authorities to pick up further, particularly if we get closer towards 7.00.
• The weekend economic news saw softer industrial profits for July. The print came in at -1.1% YTD YoY, versus +1.0% in June. This continues the recent run of softer data outcomes. Note the PMI prints on Wednesday will be this week's main data focus.
• The domestic covid situation has seen aggregate case numbers fall, but fresh lockdowns near Beijing will be monitored by the market.
• US and China also reached a preliminary deal to avoid company delistings (see this link for more details). This didn't help the China Dragon Index though (-0.65%) but still firmly up for the week (+9.90%).