A recent rally in the Chinese yuan against the US dollar has hit resistance ahead of data.
CNHUSD – Daily Chart
CNHUSD resistance came in at 0.14 and a move below 0.1385 could open up larger losses toward the 0.137 level.
The latest FOMC minutes come out at 3am HKT going into Thursday’s session and that could shed some light on the path of interest rates for the US economy. The Fed may pour some cold water on the market’s expectation for around three rate cuts in 2024.
There will be Chinese data released on Thursday at 9:45 am HKT in the form of Caixin PMI services data. The indicator slipped from 57.8 in March to 50.2 in September but jumped last month to 51.5 which puts the services sector back in expansion.
Markets were shocked this week after Chinese Premier Xi Jinping gave a rare admission that the country’s economy is in trouble. China’s businesses are struggling and job hunters are struggling to find work, he acknowledged during a New Year’s Eve speech.
Noting the “headwinds” facing the country, he added that “Some enterprises had a tough time. Some people had difficulty finding jobs and meeting basic needs. All these remain at the forefront of my mind. We will consolidate and strengthen the momentum of economic recovery.”
Ahead of his speech, the National Bureau of Statistics (NBS) published its monthly Purchasing Managers’ Index (PMI) survey, which highlighted a slowdown in factory activity in December to the lowest level in six months.
The Chinese stock market had been boosted into year-end by foreign investor flows at the highest level in five months. That will make the services data more important and could hurt the yuan if further weakness is seen. The Federal Reserve will also have a say in the matter with its projection for interest rates in the coming year.
