CNY: PMIs largely unchanged – Commerzbank

The Chinese Purchasing Managers' Index, published this morning, shows a slight improvement, though it remains at a low level. Although the manufacturing sector index rose to 49.7 (from 49.5), it remains below the 50 threshold required for expansion, indicating a slight further decline in industrial production, Commerzbank's FX analyst Volkmar Baur notes.

PBoC is continuing the trend of a slightly stronger CNY

"The sub-components also showed little change. The same applies to purchasing managers in the non-manufacturing sector, which covers services and construction. Here, too, the overall index improved slightly by 0.2 points, rising to 50.5, just above the expansion threshold. However, overall, the sub-components for new orders remain weak and point to ongoing problems."

"Looking at price developments, the PMIs also point to continued weakness. Based on current levels, producer prices are likely to have fallen again this month by around 0.4% compared with the previous month. This should cause the already significantly negative annual rate of -3.3% in May to decline further."

"In contrast, however, the CNY has strengthened again today and was trading at 7.16 against the US dollar this morning. The PBoC set its fixing at 7.1586 today — the lowest level (and thus the strongest for the CNY) since November last year. The PBoC is therefore continuing the trend of a slightly stronger CNY that has been in place since the agreement with the US in Geneva in mid-May. And as long as there is a political will for a stronger CNY, this trend should continue."