USD/CNY Outlook:
The USD/CNY exchange rate is likely to decrease as it is trading 1.5% below its 90-day average and near recent lows. The current situation is influenced by a lack of strong drivers pushing for a recovery in the USD.
Key drivers:
• Rate gap: The Federal Reserve's potential interest rate cuts could weaken the USD against the CNY.
• Risk/commodities: Recent oil price stability may not provide significant support for the USD amid ongoing economic uncertainties.
• One macro factor: China's economy is showing surprising resilience with stronger-than-expected growth, driven by government stimulus.
Range:
The rate is expected to drift within its recent stable range as it tests the lows without clear upward momentum.
What could change it:
• Upside risk: A reversal in Federal Reserve rate policy or stronger US economic data could bolster the USD.
• Downside risk: Any escalation in trade tensions or significant tariff announcements could further weaken the USD against the CNY.