USD/CNY: Yuan to weaken into year-end as central bank policies diverge – MUFG
The market mood remains tepid amid Chinese economic growth concerns, despite the uptick in the country’s inflation. All in all, economists at MUFG Bank expect the USD/CNY pair to enjoy upside momentum on divergent monetary policy between China and US.
China growth concerns remain in focus
“The trade report revealed that both export and import growth came in weaker than expected as their annual rates of growth slowed to 19.3% and 28.1% respectively in July.”
“Softer than expected external demand becomes more of a concern at a time when market participants are fearful that domestic demand is already slowing and will take another hit from further COVID-related disruption in the near-term from the ongoing spread of the Delta variant.”
“A further loss of growth momentum will keep pressure on policymakers in China to provide more support. Our China analyst expects a further RRR cut. Headline inflation remained subdued at 1.0% in July leaving room for looser policy to support growth although producer price pressures were more elevated at 9.0%.”
“Overall, we continue to expect the renminbi to weaken modestly against the US dollar heading into year-end as policies diverge between the Fed and PBoC.”
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FXStreet Insights Team
FXStreet
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