- USD/CNH struggles to justify the central bank’s money market intervention and downbeat inflation data while nearing a three-day low.
- PBOC conducts 500 billion yuan MLF, China CPI eases to 1.7% versus 1.8% YoY forecast in September.
- China President XI Jinping showed readiness for further infrastructure spending, US fiscal stimulus is still in the pipeline.
USD/CNH fades recent uptick to 6.7135 while taking rounds to 6.7120/25 during the early Thursday. In doing so, pays a little heed to the People’s Bank of China’s (PBOC) intervention as well as downbeat inflation numbers for September.
The PBOC marked the Medium-Term Lending Facility injection of funds for one year, at the same previous rate of 2.95%, as markets in China opened. The move could be in tandem with the recently dovish comments from the BOJ, RBA and RBNZ policymakers.
China’s Consumer Price Index (CPI) slowed down below 1.8% forecast to 1.7% YoY versus 2.4% prior whereas the Producer Price Index (PPI) also dropped below -1.8% expected to -2.1% in September.
Read: China CPI and PPI data missing expecations, AUD under pressure
Although domestic catalysts suggest a pullback, risk-off mood and US dollar weakness favor the pair sellers. Global markets have been worried off-late as the American Congress repeatedly failed to offer the much-awaited coronavirus (COVID-19) stimulus package. Also, rising COVID-19 figures in the west and a halt in the key vaccine trials are an additional burden to the global risk sentiment.
It’s worth mentioning that China’s President Xi failed to please market players despite showing readiness for heavy infrastructure investment and pitching for the Belt and Road project. The reason could be traced from the Asian major’s recent tussles with the US, Australia and the UK.
While portraying the mood, S&P 500 Futures drop 0.30% whereas stocks in the Asia-Pacific region, including those from China, print mild losses as we write.
Moving on, global traders will keep eyes on the risk catalysts ahead of the US Weekly Initial Jobless Claims and Philadelphia Fed Manufacturing Index data.
Technical analysis
Unless crossing a falling trend line from September 25, at 6.7525 now, bears can aim for the monthly low, also the lowest since April 2019, around 6.6785.
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