Something for your Espresso: You shall not pass!
The CNY is still in the driver’s seat of cross market action. The PBoC send a firm signal this morning with a fixing just above the 7.20 handle and it is safe to say that they are trying to deliver the memo to CNY bears. You shall not pass 7.30!
Asian FX has recovered meaningfully this morning and we are pondering whether being long Asian FX and short European FX is now THE bet since Europe tends to catch a cold when China sneezes.
If the PBoC manages to turn the tide on USDCNY, it is good news for risk appetite but markets are still unconvinced that the PBoC can defy gravity.
Chart 1: BUY risk assets if USDCNY turns