CNH: USD/CNH Makes Fresh YTD Lows Before Recovering, Aug Inflation Today
USD/CNH got too fresh 2025 lows of 7.1134 on Tuesday, before rebounding. We track near 7.1235 in early Wednesday trade, after posting little net change for Tuesday's session. Broader USD indices recovered some ground, the BBDXY up 0.20%, the DXY up 0.30% for Tuesday, as US Tsy yields rose. Spot USD/CNY finished up at 7.1238, while the CNY CFETS basket tracker fell by 0.22% to 96.44.
- USDJPY volatility (amid BoJ hike speculation) led a whippy session in global currency markets, as market participants digested a deeply negative NFP annual revision but also await significant PPI and CPI releases, due this week. As noted above the climb higher in US Tsy yields aided the dollar, while EUR/USD was also down amid lingering French political risks.
- CNH outperformed EUR softness, although at 8.3415 EUR/CNH remains within recent ranges. CNH/JPY tracks near 20.69, up from Tuesday intra-session lows (20.5634)
- For USD/CNH technicals, focus is likely to remain on downside risks, with eyes on a 7.1000 test. On the upside, the 50-day EMA resistance point continues to drift lower, last around 7.1650.
- Headlines crossed a little earlier via the FT: "*TRUMP ASKS EU TO HIT CHINA, INDIA WITH 100% TARIFFS: FT", which would be matched by the US, this move is reportedly designed to pressure Russia.
- On the data front today we have August inflation data. Headline CPI is projected at -0.2%y/y, versus flat prior. The PPI is forecast at -2.9%y/y, versus -3.6% in July.
Want to read more?
Find more articles and bullets on these widgets:
Historical bullets
AUSSIE 10-YEAR TECHS: (U5) Recovers With Treasuries
- RES 3: 96.501 - 76.4% of the Mar 14 - Nov 1 ‘23 bear leg
- RES 2: 96.207 - 61.8% of the Mar 14 - Nov 1 ‘23 bear leg
- RES 1: 95.960 - High Apr 7
- PRICE: 95.710 @ 14:34 BST Aug 8
- SUP 1: 95.415/95.300 - Low May 15 / Low Jan 14
- SUP 2: 95.275 - Low Nov 14 (cont) and a key support
- SUP 3: 94.707 - 1.0% 10-dma envelope
Aussie 10-yr futures received a boost from the US Treasury rally that followed a poor NFP print. This keeps Aussie 10-year futures toward the top end of the recent range. To the upside, next resistance is at 96.207, a Fibonacci retracement point. Next support undercuts at 95.420 (pierced), the Feb 13 low, ahead of 95.275, the Nov 14 low and a key support. Clearance of this level would strengthen a bearish condition.
SECURITY: Trump To Sign Trilateral Peace Accord With Armenia/Azerbaijan Shortly
US President Donald Trump is shortly due to sign a trilateral peace agreement with Armenian Prime Minister Nikol Pashinyan and Azerbaijani President Ilham Aliyev at the White House. LIVESTREAM The event will provide another opportunity for Trump to style himself as peacemaker, after touting success in brokering peace deals between Rwanda/Congo, Cambodia/Thailand, and India/Pakistan.
- The accord aims to resolve a decade-long dispute over the sovereignty of Nagorno-Karabakh - a breakaway Azerbaijani province that was under de facto Armenian control from the dissolution of the Soviet Union until a 2020 war.
- Trump described the meeting on Truth Social as a “historic peace summit,” noting that the US will also sign “Bilateral Agreements [to] fully unlock the potential of the South Caucasus Region.”
- White House spokeswoman Anna Kelly told reporters that Trump would sign deals with both Armenia and Azerbaijan on energy, technology, economic cooperation, border security, infrastructure and trade.
- A White House official said: "It's about the entire region, and [the leaders] know that that region is known to be safer and more prosperous with President Trump."
- Reuters reports that the US will have development rights to build transportation links in the strategic Zangezur Corridor, a mountainous stretch of Armenian territory between Azerbaijan and its Nakhichevan exclave.
- Politico notes: “But whether this is just a photo opportunity or a lasting end to a conflict that has undermined stability in a region dominated by Russia and Iran will depend on whether the US can address several key challenges.”
FED: Balance Sheet Runoff Continues At Steady $20B/Month Pace (2/2)
Fed asset holdings were little changed in the past week. SOMA runoff totaled $2.8B (composed of $4.2B less nominal Tsy holdings and $1.4B more TIPS), with emergency lending/liquidity facilities $0.7B lower.
- Over the last 4 weeks, the $20B/monthly expected QT pace was roughly adhered to: MBS fell $18B, with Treasury net holdings down around $2B (a fall in TIPS holdings offsetting a slight rise in nominals).
- Discount window usage accounted for the fall in lending facility usage this week; takeup is now down to $4.9B, down $1.3B in the last month and down from the 1-year high of $6.4B set in July which looks to have been a temporary blip higher.
