USD/CNY Outlook:
Likely to decrease, as the rate is below its recent average and near recent lows.
Key drivers:
• Rate gap: The Federal Reserve is maintaining rates while the People's Bank of China is implementing rate cuts, creating a diverging policy stance.
• Risk/commodities: The US dollar is under pressure due to geopolitical tensions and a significant reduction in investor interest in US assets, which weakens the dollar.
• One macro factor: China's introduction of stimulus measures to support private enterprises indicates a commitment to economic recovery, which strengthens the yuan's position.
Range:
Expect USD/CNY to drift within the recent 3-month range, as it remains at the lower end.
What could change it:
• Upside risk: An unexpected U.S. labor market report showing significant job growth could strengthen the USD.
• Downside risk: Additional geopolitical tensions or more aggressive monetary easing from the PBOC might further weaken the USD against the CNY.
