USD/CNY Outlook: Likely to decrease, as the rate is currently below its recent average and near recent lows, pressured by weak US economic data.
Key drivers:
• Rate gap: The Federal Reserve has paused interest rate cuts, while the People's Bank of China has lowered interest rates and introduced support measures to stimulate growth, widening the gap between the two currencies' monetary policies.
• Risk/commodities: Recent weakness in the US economy, highlighted by stagnant retail sales, raises concerns and may affect the USD negatively in the context of a generally declining risk appetite.
• One macro factor: Investor caution is increasing due to renewed geopolitical tensions under the Trump administration, complicating trade relations and impacting demand for the USD.
Range: Expect the USD/CNY to move within its established range, with potential for gradual decline.
What could change it:
• Upside risk: A stronger-than-expected US jobs report could buoy the USD and improve its outlook.
• Downside risk: Continued signs of an economic slowdown in the US may further weaken the USD against the CNY.
