The G20 summit took place in Bali, Indonesia, on November 2022…
Chinese yuan dropped after dire inflation data
Information is not investment advice
USD/CNH has been steadily dipping, but downbeat China’s PPI and CPI limit the further falling.
Chinese Producer and Consumer Price Indices came out worse than analysts anticipated: CPI rose by 1.7% vs. the forecast of 1.9%, whereas PPI contracted by 2.1% vs. the -1.9% expected.
The People’s Bank of China (PBoC) is unsatisfied with too much appreciated CNH as it makes China’s exports more expensive for buyers. In fact, China has been the world's largest exporter of goods since 2009. Why? Their products are simply cheaper, that’ why it’s crucial for China not to lose this advantage.
The PBoC changed the rules, making it cheaper for traders to bet against the yuan. According to Reuters, the bank claimed it “would lower to 0 from 20% the reserve requirement ratio for financial organizations when conducting some foreign exchange forwards trading”. By the way, analysts said that the PBOC tried the same move in 2017 and it didn’t help to stop the appreciation of the yuan.
The negative inflation data weighed on the Chinese yuan, and PBoC’s actions added headwinds to it. Besides, the pair is rising due to the high demand for the USD amid the risk-off sentiment.
According to United Overseas Bank, USD/CNH will keep falling in the long-term and will reach 6.60 by the middle of next year.
USD/CNH has been trading in a descending channel since late May. It may jump to the resistance of 6.7625, but the pair isn’t likely to break the upper trendline. We can expect it to bounce off this level and drop to the recent low of 6.6850, clearing the way towards the next support of 6.6500.
The deafening news shocked the whole world yesterday: the British Queen Elizabeth II died peacefully at the age of 96…
After months of pressure from the White House, Saudi Arabia relented and agreed with other OPEC+ members to increase production.
On Thursday, the 2nd of February, the Bank of England will publish its report concerning interest rates and inflation data for the Eurozone. Professionals and investors anticipate that Andrew Bailey’s lead team of policy makers will likely raise interest rates to 4%; the highest in over a decade, for the tenth time in a row.
The first FOMC meeting comes after a buildup of anticipation from traders and investors alike, as the markets await what posture the Fed will take regarding the interest rates; would there be a hike or a cut in interest rates? Recall that the Federal Open Market Committee had previously ended the year 2022 with a 50bps hike, and an indication from Powell, the committee chairman, that the Fed could consider raising interest rates by 75bps in the course of the year 2023.
Western countries are trying to find other options for oil and gas supplies after a 10th package of sanctions, which will put more pressure on Russian oil and decrease global oil supply. Italy, for example, is in talks with Libya.