USD/CNH: Offshore yuan remains weak despite above-forecast China GDP

Offshore Yuan (CNH) continues to trade in the red despite a bigger-than-expected rebound in China's economy in the second quarter. The USD/CNH pair is trading at 6.9874, representing a 0.10% gain on the day. 

At 02:00 GMT, China reported a second-quarter gross domestic product (GDP) of 11.5%. The growth rate was expected to rebound to 9.6% quarter-on-quarter from the first quarter's -9.8%. 

Meanwhile, consumer spending for June, as represented by retail sales, came in at -1.8% year-on-year versus expectations for a 0.3% rise and -2.8% previous. Industrial production rose 4.8% year-on-year in June, beating expectations for a 4.7% rise, following May's 4.4% growth. 

So far, the upbeat GDP and factory data have failed to put a bid under yuan. The Chinese currency's dismal response could be attributed to rising tensions between the US and China. 

President Trump, on Tuesday, signed an executive order to shun Hong Kong’s special trading status and threatened additional steps that got the expected response from China. As per the latest reports, the US is said to be weighing a sweeping travel ban on Chinese Communist Party members, a move that is likely to prompt sharp retaliation. 

Another possible reason for the sustained uptick in USD/CNH could be the losses in the US stock futures and the resulting demand for the safe-haven US dollar. At press time, the S&P 500 futures are down more than 0.20%. 

It appears as though the escalating tensions between the US and China are now overshadowing the optimism generated by the news of coronavirus vaccine. President Donald Trump, Oxford Scientists, and US health official Fauci said on Tuesday that the vaccine for the deadly virus will be out soon. Earlier this week, biotech firm Moderna Inc's experimental vaccine for COVID-19 showed positive results in clinical trials. 

Technical levels