EUR/CNY Outlook:
Slightly positive, but likely to move sideways as the rate is near its 90-day average and lacks strong directional drivers.
Key drivers:
• Rate gap: The European Central Bank has maintained interest rates while the People's Bank of China has recently lowered rates to support the economy, creating a divergence in monetary policy.
• Risk/commodities: The recent rise in oil prices may bolster the euro's value, affecting trade dynamics with China, though both currencies are under pressure from global economic conditions.
• Market dynamics: Eurozone inflation has fallen below the ECB's target, raising questions about future rate cuts and leading to market indecision.
Range:
Expect the EUR/CNY to hold around current levels, oscillating within its recent 3-month trading band.
What could change it:
• Upside risk: A faster-than-expected recovery in Eurozone economic indicators could strengthen the euro.
• Downside risk: Further interest rate cuts by the PBOC could weaken the yuan, impacting the EUR/CNY rate.