USD CNH | US Dollar Chinese Yuan Offshore

The comment from Fed officials last week helped USD to surge and the expectations of 75bps rate hike on the next meeting which will be on 21st September. Last week there was a discussion of Fed officials about how it is premature to worry about the economy falling into recession and how they need to completely convince inflation coming down before stopping interest rate hikes.

China reported some unexpected data last week. Industrial production for the past month decreased to 3.8% YoY vs 4.6% which was expected. Retail sales for the last month decreased to 2.7% YoY and expectation was 5% YoY. As Covid issues continue, increasing drought conditions and worries of a collapsing housing market, the Public Bank Of China decreased its 1 year loan prime rate to 3.65% which was 5bps. The central bank then went on and said that it plans to spend $29 billion in special loans to troubled developers. However, the central bank will still have more to go if it plans on saving the dire housing market.

The troubling economic data out of China leading to rate cuts, along with an expected hawkish speech from Fed Chairman Powell on Friday at the Jackson Hole Symposium, USD/CNH could be volatile this week. Throw in a week housing market in China, along with the double top highs near 7.1987.