CNH: USD/CNY Fixing Lower, But Error Term Positive

The USD/CNY fix printed at 7.2014, versus a BBG market consensus of 7.2678.

• Today's fix delivered another downtick in the fixing, but we remain above the 7.2000 level. The fixing error narrowed further to -664pips. This is the narrowest outcome since March 20, showing the error term is taking some of the slack from lower USD index levels.
• USD/CNH has been relatively steady in the first part of Wednesday trade, the pair unable to sustain +7.2700 levels.
• Coming up shortly we have the PMI prints for April. 

• CHINA SETS YUAN CENTRAL PARITY AT 7.2014 WEDS VS 7.2029

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EXECUTIVE SUMMARY

• The Bank of Japan (BoJ) is scheduled to hold its Monetary Policy Meeting (MPM) on April 30–May 1, during which it will also release its latest Outlook Report. The BoJ is widely expected to leave its benchmark interest rate unchanged at 0.5%.
• This decision comes amid a complicated economic backdrop: while Tokyo’s core inflation rose to 3.4% in April — its highest level in two years, driven by higher food prices and reduced energy subsidies — risks to economic growth are increasing.
• Given the significant shifts in external conditions, particularly the U.S. tariff policy changes since the last MPM in March, the BoJ is likely to adopt a cautious, wait-and-see stance at this meeting.
• Looking ahead, most analysts believe that the next interest rate hike will not occur before October 2025 at the earliest.
• As for the BoJ's Outlook Report, it is unlikely that the Bank will dramatically alter its baseline scenario. That said, the BoJ is expected to revise down its economic and inflation forecasts for the fiscal year 2025.
• Governor Ueda’s upcoming press conference is expected to attract considerable attention, especially regarding how the recent external shocks might influence the BoJ’s economic and inflation projections and future monetary policy.

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