USD/CNH turns red on solid Caixin October PMI
|- CNH picked up a bid on the upbeat Caixin PMI report.
- The losses in the USD/CNH could be reversed on potential risk aversion.
The bid around China's offshore Yuan (CNH) strengthened, pushing the USD/CNH pair lower from the session high of 7.0515 after key data showed China's factory activity unexpectedly expanded at the fastest pace in well over two years in October.
The Caixin/Markit Manufacturing Purchasing Managers' Index (PMI), which focuses on small and medium-sized export-oriented units, rose to 51.7 in October from 51.4 in September, marking the third straight month of expansion and beating the expected dip in growth to 51.0.
Notably, the pace of expansion was the fastest in over two years.
The data has likely relieved tensions of a deeper economic slowdown, triggered by the official (government) PMI released on Thursday, which showed the factory activity shrank for a sixth straight month in October and growth in the service sector fell to lowest since February 2016.
As a result, the USD/CNH pair surrendered gains and was last seen trading at session lows near 7.0415, representing a 0.10% loss on the day.
The losses, however, will likely be reversed if the S&P 500 futures drop into the red, boosting haven demand for the US Treasuries and the US Dollar. As of writing, the index futures are reporting a 0.21% gain.
The losses in the index futures cannot be ruled out, as historical data shows the US equities have a strong positive correlation with the Fed funds rate. The Federal Reserve (Fed) delivered a third 25 basis point rate cut of 2019 on Oct.30.
Technical levels
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