USD/CNY: Rise reflects US dollar strength - Danske Bank

Matías Salord FXStreet

According to analysts from Danske Bank, the rise in the USD/CNY during the past month is based on a stronger US dollar. They see the pair moving to the upside in the medium term on the back of CNY weakness.

Key Quotes:

“The trade-weighted USD has strengthened close to 5% over the past month, whereas the move in USD/CNY is only around 1.6%. This is also reflected in the CNY being stronger versus the EUR compared to a month ago. While capital outflows have picked up in the past months, the main driver of the recent USD/CNY move is thus USD strength. This in contrast with the rise in USD/CNY from August 2015 to July 2016, which was part of a broader CNY weakening.”

“There is no sign that China is intervening to stem the move in USD/CNY. This would show up in higher CNH money market rates but these are actually lower this week. It partly explains why the rise in USD/CNY is not associated with a risk-off move as was the case in January and over the summer when USD/CNY also moved up.”

“We continue to look for the CNY to weaken over the coming year. However, we expect it to be broader-based CNY weakness due to fading growth momentum in 2017 and increasing financial risks from a sharp rise in corporate debt and growth in shadow financing.”

“We look for USD/CNY to move to 7.1 +12m (current 6.77) and EUR/CNY to move to 8.38 +12M (current 7.37).”

Author

Matías Salord

FXStreet

Matías started in financial markets in 2008, after graduating in Economics. He was trained in chart analysis and then became an educator. He also studied Journalism. He started writing analyses for specialized websites before joining FXStreet.

EUR/USD trims losses, back to 1.1830

EUR/USD manages to regain some composure, leaving behind part of the earlier losses and reclaim the 1.1830 region on Tuesday. In the meantime, the US Dollar’s upside impulse loses some momentum while investors remain cautious ahead of upcoming US data releases, including the FOMC Minutes.

GBP/USD bounces off lows, retargets 1.3550

After bottoming out just below the 1.3500 yardstick, GBP/USD now gathers some fresh bids and advances to the 1.3530-1.3540 band in the latter part of Tuesday’s session. Cable’s recovery comes as the Greenback surrenders part of its advance, although it keeps the bullish bias well in place for the day.

Gold remains offered below $5,000

Gold stays on the defensive on Tuesday, receding to the sub-$5,000 region per troy ounce on the back of the persistent move higher in the Greenback. The precious metal’s decline is also underpinned by the modest uptick in US Treasury yields across the spectrum.

Crypto Today: Bitcoin, Ethereum, XRP upside looks limited amid deteriorating retail demand

The cryptocurrency market extends weakness with major coins including Bitcoin (BTC), Ethereum (ETH) and Ripple (XRP) trading in sideways price action at the time of writing on Tuesday.

UK jobs market weakens, bolstering rate cut hopes

In the UK, the latest jobs report made for difficult reading. Nonetheless, this represents yet another reminder for the Bank of England that they need to act swiftly given the collapse in inflation expected over the coming months.

Ripple slides to $1.45 as downside risks surge

Ripple edges lower at the time of writing on Tuesday, from the daily open of $1.48, as headwinds persist across the crypto market. A short-term support is emerging at $1.45, but a buildup of bearish positions could further weaken the derivatives market and prolong the correction.