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The CNY did not react to the soft print of industrial production and indeed, earlier PBoC comments that it has tools to stabilize the yuan is still having an impact on market sentiment, according to Frances Cheung, Head of Macro Strategy at Westpac.

Key Quotes

“USD/CNY is likely to trade in a range between 6.65 and 6.76. CNY and CNH forwards points stay at low levels and market awaits June forward book data.”

“While China’s Q2 GDP came in as expected, the soft June production may serve as an initial signal on potential impact from trade tensions. On trade, June imports growth slowed markedly. Arguably the slow imports growth may represent expectations for slower demand for final goods.”

“The credit data are less worrying to us. The slow aggregate financing growth was primarily due to month-on-month falls in bankers’ acceptances, trust and entrusted loans (representing the shadow banking segment) while yuan loan growth held up well. This combination is precisely what the authorities would like to see.”