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MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.
CNH
Whilst most market attention tomorrow morning will be on digesting the Fed meeting outcome, for USD/CNH watchers the onshore USD/CNY fix will also be in focus.
- Tomorrow's USD/CNY fix will be the first since last Friday, as China markets re-open.
- The last two fixes (Thurs and Fri last week), came in below market estimates by -36 and -37pips respectively. Interestingly, this is the largest cumulative downside surprise for the fixing across 2 sessions since early 2020, see the first chart below.
- Tomorrow's fix carries extra uncertainty, as we can often see more meaningful divergences between the fix and market expectations after China markets have returned from holidays. This is particularly the case if we see a strong USD move whilst onshore markets have been closed.
- At this stage, broad USD levels aren't greatly different from the end of last week, but this could change come tomorrow morning depending on the Fed meeting.
Leaning against the depreciation trend comes after the sharp sell-off in the China currency over the past month, see the second chart below.
- Historically, the authorities have managed the pace of change in the China currency, and this episode is not likely to be any different.
- The market will still likely be focused on relative fundamentals, in terms of divergence monetary policy trends and the continuing Covid situation onshore in China and what impact this has on the growth outlook.
- Short term volatility can still be driven by the fixing bias though.
Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.
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