USD/CNY Outlook:
Bearish, as the rate is below its recent average and near its recent lows, driven by the Federal Reserve's maintained interest rates amidst overall dollar weakness.
Key drivers:
• Rate gap: The Federal Reserve's decision to hold interest rates steady contrasts with the People's Bank of China's recent rate cuts aimed at stimulating the economy.
• Risk/commodities: With a decline in global demand for U.S. assets, particularly due to geopolitical tensions, the dollar faces downward pressure.
• One macro factor: China's economic efforts, including substantial government stimulus and measures to manage the yuan's value, are supporting the CNY.
Range:
USD/CNY is likely to drift within the recent range, given current pressures while moving sideways.
What could change it:
• Upside risk: A stronger-than-expected U.S. job market report leading to renewed dollar strength could support a rally.
• Downside risk: Further geopolitical tensions or an accelerated pace of dollar selling by international investors may weaken the USD further.
