USD/CNH struggles around 6.4850 amid PBOC news, focus on Fed’s Powell

• USD/CNH edges higher after positing the biggest daily jump in a week.
• China Industrial Profit eased in July, US data were mixed as well.
• PBOC makes the biggest weekly cash injections, RRR cut teased.
• Sino–US jitters intensify, covid woes occupy table but nothing matter more than Jackson Hole.

USD/CNH fails to repeat the previous day’s upbeat momentum, seesaws around 6.4850 during early Friday. In doing so, the offshore Chinese currency (USD/CNH) pair pays a little heed to the headlines concerning the People’s Bank Of China (PBOC), not to forget Sino-American tussles, amid pre-Powell showdown anxiety.

As per the latest PBOC statement, the Chinese central bank is committed to deploying monetary policy tools for boosting rural development. It’s worth noting that Reuters came out with the news suggesting heavy cash injections. “China’s central bank increased its short-term fund injection this week by offering the most cash on a net basis in nearly seven months to meet higher cash demand towards the month-end,” said the news.

In a separate update, China’s Commerce Ministry said, “Economic and trade teams from China and the US have maintained normal communication.”

Talking about data, China’s Industrial Production for July eased from 20% YoY to 16.4%. On the other hand, the second version of the US Q2 Gross Domestic Product (GDP) got upward revision to 6.6% QoQ versus 6.5% prior, missing the expected 6.7% whereas Core PCE figures in the same quarter were confirmed the prior market consensus of 6.1%. Further, weekly jobless claims also inched up but held lower ground.

It should be noted that the latest Fedspeak has been hawkish and weighed on the risk appetite the previous day, joined by the geopolitical jitters concerning Afghanistan.

While portraying the market’s mood, S&P 500 Futures print mild losses, tracking the Wall Street benchmarks, whereas the US 10-year Treasury yields remain pressured around 1.34% at the latest. Furthermore, the US Dollar Index (DXY) also struggles to extend Thursday’s recovery moves.

Despite the PBOC readiness to ease, USD/CNH moves seem to have limited upside unless Fed Chair Jerome Powell defends bulls, which is less likely.

Read: Fed Chair Powell’s Jackson Hole Speech: Caution will win out

Technical analysis

A clear break of 200-DMA, around 6.4810, directs USD/CNH to a 6.4870 level ahead of the monthly high of 6.5102.