EUR/CNY Outlook:
The outlook for EUR/CNY is likely to decrease as the rate is currently near 90-day lows and significantly below its recent average. The combination of weak Eurozone economic data and rising energy prices pressures the euro.
Key drivers:
- Rate gap: The People's Bank of China is expected to lower interest rates, while the European Central Bank faces challenges with energy-linked inflation, making the EUR less attractive.
- Risk/commodities: Oil prices are at recent highs, contributing to increased inflation risks in the Eurozone, which typically weakens the euro against the yuan.
- One macro factor: A notable contraction in Germany's retail sales indicates weakening consumer demand, adding to economic concerns.
Range:
Expect EUR/CNY to hold within its recent range, likely sticking closely to the 90-day lows.
What could change it:
- Upside risk: A significant positive shift in Eurozone inflation data could prompt a reassessment of ECB policy.
- Downside risk: Further spikes in energy prices or negative economic reports from the Eurozone could drive the euro lower.
