The yuan tries to regain height thanks to reassuring news on the economy
The yuan is trying to rebound against its American counterpart ahead of the long-awaited outcome of the Fed’s monetary policy meeting. There is no doubt that the Federal Reserve will strike a particularly hawkish tone tonight and raise rates, but the central bank could surprise by simply raising rates by 50 basis points tonight as traders anticipate now a bigger increase.
While demand for the dollar will largely depend on the magnitude of the Fed’s rate hike this evening, demand for the yuan is strengthening thanks to an increasingly optimistic economic outlook. Indeed, despite Xi Jinping’s still threatening “zero contamination” policy, the Chinese economy has managed to perform better than expected during the last period of health restrictions. Industrial production unexpectedly rose in May (+0.7%), while retail sales fell less than expected (-6.7%).
Meanwhile, a spokesperson for China’s National Bureau of Statistics said the economy is expected to grow “reasonably” in the second quarter, helped by a pickup in manufacturing and infrastructure investment, a rebound in industrial production and improved logistics. By contrast, the economic outlook is increasingly bleak in developed economies, especially the United States.
The dollar is expected to remain strong due to its safe haven status, but the yuan could take advantage of the lifting of health restrictions, the resilience of the Chinese economy and fiscal stimulus to retrace some of its April losses. and May in the short term.
USD/CNH daily price chart – key levels