- USD/CNH remains mildly bid while consolidating the biggest daily loss since November 10.
- China’s official NBS Manufacturing PMI and Non-Manufacturing PMI both disappointed in November.
- Cautious mood ahead of key data/events restricts immediate moves even as optimism surrounding China teases bears.
USD/CNH licks its wounds near 7.1590, picking up bids of late, as it pares the biggest daily loss in a fortnight during early Wednesday. The pair’s latest moves justify downbeat prints of China’s official activity data for November amid a cautious mood ahead of the crucial catalysts scheduled to release from the United States.
That said, China’s officials NBS Manufacturing PMI dropped to 48.0 versus 49.2 expected and 49.0 prior. Further details mention that the Non-Manufacturing PMI also slumped to 46.7 from 48.7 prior and 51.7 expected.
It should be noted that the news surrounding the gradual easing of the strict Covid-led lockdowns in China failed to favor the offshore Chinese Yuan (CNH). China announced multiple measures to ease the strict lockdown in the key areas after witnessing a retreat in the daily Covid infections from a record high. Even so, the world’s second-largest economy kept its Zero-Covid policy intact. Bloomberg reported the reopening of some city buildings in the greater Zhengzhou region, the home of a key iPhone plant. Earlier on Tuesday, the news broke that China's Guangdong province will allow the close contacts of Covid cases to quarantine at home.
Against this backdrop, the S&P 500 Futures remains indecisive after a mixed closing of Wall Street whereas the US 10-year Treasury bond yields ended Tuesday on a firmer footing, up six basis points (bps) to 3.748%, down one bps to 3.73% at the latest.
The market’s cautious mood could be linked to the anxiety ahead of Fed Chairman Jerome Powell’s first public appearance since November Federal Open Market Committee (FOMC) meeting amid hawkish hopes. Also important is the US ADP Employment Change for November, expected at 200K versus 239K prior, and the second reading of the US Gross Domestic Product (GDP) for the third quarter (Q3), expected to confirm 2.6% Annualized growth.
Technical analysis
A daily closing below a two-week-old ascending trend line keeps the USD/CNH bears hopeful of revisiting the monthly low surrounding 7.0200.
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