USD/CNY Outlook: The exchange rate is likely to decrease as it is currently near recent lows and below its 90-day average, pressured by significant developments in both economies.
Key drivers:
- Rate gap: The Federal Reserve is expected to implement rate cuts, while the People's Bank of China is stabilizing the yuan, emphasizing opposing monetary policy directions.
- Risk/commodities: Oil prices remain high, but recent fears of tariffs on U.S. exports create uncertainty for the dollar and could sustain weakness.
- One macro factor: China's economy is showing modest growth amid substantial government stimulus, which may support the yuan against the dollar.
Range: The USD/CNY is likely to hold within its recent range as pressures from U.S. policy uncertainties balance against stabilization efforts by China.
What could change it:
- Upside risk: Signs of stronger economic data from the U.S. could boost the dollar's appeal.
- Downside risk: Escalation in geopolitical tensions involving the U.S. might further weaken the dollar.
