USD/CNY Outlook: The outlook is slightly weaker, but likely to move sideways as the rate is below its recent average and near its recent lows without a clear driver.
Key drivers:
• Rate gap: The Federal Reserve is expected to cut rates soon, while the People's Bank of China continues to ease monetary policy, creating a widening gap in interest rates that may pressure the USD against the CNY.
• Risk/commodities: Volatility in the oil market, along with geopolitical tensions, is impacting risk appetite for the USD as traders seek safer currencies like the CNY.
• One macro factor: Recent data indicate a stronger-than-expected growth in China’s economy, bolstered by significant government stimulus, improving the appeal of the CNY.
Range: The USD/CNY is likely to hold within the recent range, with limited movement expected given the pressures on the USD.
What could change it:
• Upside risk: A sudden escalation in U.S.-China trade tensions could boost the USD if it leads to increased demand for safe-haven assets.
• Downside risk: Further deterioration in U.S. economic data could reinforce bearish pressures on the USD, pushing it lower against the CNY.
