CHINA: CNY, CNH Edge to New Daily Lows, Rebuffing Strongest CNY Fix Since 2023
Feb-04 09:34
USDCNY and USDCNH seeing some buying interest in recent trade, with both pairs edging to new session highs of 6.9425 and 6.9404 respectively - but we note no specific headlines behind the move. News that Putin is holding a videocall with Xi Jinping unlikely to be the driver here, but moves to follow the further strength in the CNY fix Wednesday: the 6.9533 fix was again the lowest since mid-2023 but still well above expectations (survey saw today's fix at 6.9363).
- We noted yesterday that recent fix behaviour endorses CNY appreciation - but only at a pace acceptable to the authorities. Outside of the fix strategy, liquidity management into the Lunar New Year (Feb 17th) and possible market management via state-owned banks are in focus: there were several instances of state-owned banks buying USD through phases of uncomfortable CNY strength in recent years, but not recycling the purchased USD via swaps - the net result being tighter local dollar liquidity - and more acute negative carry for USD/CNY shorts.
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MNI: UK BOE NOV MORTGAGE APPROVALS 64,530
Jan-05 09:30
- MNI: UK BOE NOV MORTGAGE APPROVALS 64,530
- UK BOE NOV SECURED LENDING GBP4.49 BLN
- UK BOE NOV CONSUMER CREDIT GBP2.08 BLN
MNI: UK NOV M4 MONEY SUPPLY +0.8% M/M, +4.3% Y/Y
Jan-05 09:30
- MNI: UK NOV M4 MONEY SUPPLY +0.8% M/M, +4.3% Y/Y
BONDS: Gilt/Bunds Tightens, Dec Lows Unchallenged
Jan-05 09:26
Gilts also outperform Bunds, with the 10-Year spread narrowing by ~1bp to 162.5bp this morning.
- Fiscal divergence, with Germany’s plans for fiscal loosening and the UK’s (backloaded) fiscal tightening outlined in the November Budget, coupled with the likelihood of further BoE easing, keeps focus on the downside in the spread in the immediate term.
- December’s closing low 161.09bp presents the next downside target.
- A reminder that dips below 160bp were quickly faded last month.
- A more meaningful break below 160bp would expose the July ’24 closing low (156.93bp).
- Note that any re-intensification of lingering UK fiscal risks could quickly alter the balance in the spread.
Fig. 1: UK/Germany 10-Year Yield Spread (bp)
