Weaker GDP Target
Following a return to strength over recent weeks amidst a stream of encouraging economic data, the Chinese Yuan is weaker on Monday as traders digest the latest news from the weekend. The annual National People’s Congress (NPC) got underway on Sunday and the main headline so far is the PBoC setting out a growth target of 5% GDP for 2023. This was a little below the 5.5%/6% target that most players were anticipating and has raised questions over the health of the Chinese economy as well as the prospect of any further stimulus this year.
Reduced Stimulus Expectations
One view is that the lower growth target lays the foundation for incoming premier Li Qiang to enjoy popularity should Chinese GDP end up surpassing this target. However, another view is that the PBoC and Chinese Government are looking to focus on stability this year over-growth, reducing the likelihood of more stimulus this year. Stimulus events in China have always been welcomed by global markets, reflected in better risk appetite which might instead suffer without any Chinese stimulus this year.
Li Qiang Debut March 13th
Traders now await March 13th when the incoming premier makes his debut. Markets will be keen to see whether Li Qiang strikes a significantly different tone from Xi Jinping or if there is likely to be consistency in leadership style. This week, traders will look to incoming combined trade date due overnight. If this data beats forecasts, CNH should see some revived demand. However, any weakness will feed into the narrative of subdued Chinese economic activity which will weigh on the Yuan.
Technical Views
USDCNH
The pair is once again looking to break out above the bear channel from last year’s highs as the rally off 6.7811 gathers pace. With momentum studies bullish, the focus is on a test of the 7.0425 level next and an eventual break higher towards the 7.1743 level next.
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With 10 years of experience as a private trader and professional market analyst under his belt, James has carved out an impressive industry reputation. Able to both dissect and explain the key fundamental developments in the market, he communicates their importance and relevance in a succinct and straight forward manner.