USD/CNY Fundamental Forecast – April 29, 2016

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Published: Apr 28, 2016, 03:45 UTC

The USD/CNY tumbled 14 points in off shore trading as the dollar continued to fall after the FOMC statement released last evening. The yen is trading at

USD/CNY Fundamental Forecast – April 29, 2016

The USD/CNY tumbled 14 points in off shore trading as the dollar continued to fall after the FOMC statement released last evening. The yen is trading at 6.4936. The Federal Open Market Committee kept the target range for its overnight lending rate at 0.25 percent to 0.5 percent, as expected, noting an improvement in the US labor market and saying it remained confident inflation would rise to its 2 percent target over the medium term. It dropped a reference from its previous statement about global economic and financial risks but added it was closely monitoring offshore developments.

Bloomberg reported that the yuan fell toward a one-month low in Hong Kong after the People’s Bank of China cut the currency’s reference rate and the Federal Reserve signaled it will probably raise interest rates at a gradual pace.

The dollar traded in a narrow range against most currencies on Wednesday after U.S. central bankers left borrowing costs unchanged and their statement suggested they are less worried about risks posed by global economic weakness. The probability traders assign to a hike in June climbed to 21.1 percent from 19.6 percent a week ago, data tracked by Bloomberg show. China’s central bank lowered the yuan’s daily fixing for the first time in three days on Thursday, weakening it by 0.18 percent to 6.4954 a dollar.

The People’s Bank of China pumped more money into the economy again on Wednesday, continuing April’s series of large reverse repo actions. The PBOC has conducted reverse repos every working day since April 5th. That has included frequent Medium-term Lending Facility loans that also lend money to the banks.

The most common tool the PBOC uses to inject liquidity into the money markets is reverse repurchase agreements. The central bank buys bonds from commercial banks which gives the lenders more cash on hand, and the banks then agree to buy the bonds back later at a slightly higher rate within a fixed period of time. Today the PBOC injected another 120 billion yuan on the top of 680 billion it had put in last week. Last week’s figure was only 10-billion-yuan shy of the PBOC’s largest weekly injection ever.

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Today’s economic releases:

Cur.	Event	Actual	Forecast	Previous
NZD	Interest Rate Decision	2.25%	2.25%	2.25%
JPY	Household Spending (YoY) (Mar)	-5.3%	-4.2%	1.2%
JPY	Household Spending (MoM) (Mar)	0.5%	-0.3%	1.7%
JPY	Jobs/applications ratio (Mar)	1.30	1.28	1.28
JPY	National Core CPI (YoY) (Mar)	-0.3%	-0.2%	0.0%
JPY	Tokyo Core CPI (YoY) (Apr)	-0.3%	-0.3%	-0.3%
JPY	Industrial Production (MoM) (Mar)	3.6%	2.9%	-5.2%
JPY	Retail Sales (YoY) (Mar)	-1.1%	-1.5%	0.4%
JPY	BoJ Monetary Policy Statement
JPY	Interest Rate Decision	-0.10%	-0.10%	-0.10%
JPY	BoJ Outlook Report (YoY)
GBP	Nationwide HPI (YoY) (Apr)		5.0%	5.7%
JPY	BoJ Press Conference
EUR	German Unemployment Change (Apr)		4K	0K
EUR	German Unemployment Rate (Apr)		6.2%	6.2%
EUR	German CPI (MoM) (Apr)		-0.2%	0.8%
USD	GDP (QoQ) (Q1)		0.7%	1.4%
USD	Initial Jobless Claims		260K	247K

Upcoming Economic Events that you should be monitoring:

Friday, April 29, 2016

Cur.	Event	Actual	Forecast	Previous
	Japan – Showa Day
NZD	Building Consents (MoM) (Mar)			10.8%
NZD	ANZ Business Confidence (Apr)			3.2
AUD	PPI (QoQ) (Q1)		0.2%	0.3%
AUD	Private Sector Credit (MoM) (Mar)		0.6%	0.6%
EUR	German Retail Sales (MoM) (Mar)		0.3%	-0.4%
EUR	Core CPI (YoY)		0.9%	1.0%
EUR	GDP (QoQ) (Q1)		0.4%	0.3%
EUR	Unemployment Rate (Mar)		10.3%	10.3%
GBP	BoE MPC Member Cunliffe Speaks
USD	Core PCE Price Index (MoM) (Mar)		0.1%	0.1%
USD	Personal Spending (MoM) (Mar)		0.2%	0.1%
CAD	GDP (MoM) (Feb)		-0.1%	0.6%
CAD	RMPI (MoM) (Mar)		3.7%	-2.6%
USD	Chicago PMI (Apr)		53.0	53.6
USD	Michigan Consumer Expectations		80.2	79.6
USD	Michigan Consumer Sentiment (Apr)		90.0	89.7
USD	Baker Hughes U.S. Rig Count			343