Ella 
USD/CNH bargain hunting increased, testing the highest level since late November 2022, rising for the third day in a row.
The People’s Bank of China lowered the seven-day repurchase rate to 1.9%, adding to concerns about China’s slowing growth.
With U.S. inflation and the Fed decision looming, mixed market sentiment and consolidation ahead of key data challenges for dollar traders.
Earlier on Tuesday, the People’s Bank of China unexpectedly announced an interest rate cut, and USD/CNY hit a multi-day high again. Namely, the People’s Bank of China (PBoC) cut the repo rate from 2.0% to 1.9%, and pushed the offshore yuan (CNH) price up to 7.1750 at one point, the highest level since late November 2022, as of press time At that time, the offshore RMB was around 7.1710.
According to Bloomberg, “the PBOC lowered short-term policy rates and eased monetary stance to help the recovery, after the People’s Bank of China’s rate cut confirmed previous fears that growth in China, the world’s largest industrial nation, was slowing.”
Adding strength to the USD/CNY pair could be heightened concerns over tensions between the U.S. and China. According to Reuters, China has offered to protect Chinese companies from any U.S. sanctions. Recently, Bloomberg released a transcript of U.S. Treasury Secretary Janet Yellen’s scheduled testimony before the House Financial Services Committee, in which Yellen said that the International Monetary Fund (IMF) and World Bank (WB) are critical of the impact of foreign exchange from other countries, including China. Opaque, unsustainable lending acts as an important check and balance.
However, it should be noted that continued concerns about the Fed’s dovish outlook on Wednesday, coupled with weak U.S. Treasury yields, limited the upside for USD/CNY.
Affected by the above factors, it is difficult for the S&P 500 index futures to follow the rise of U.S. stocks. The U.S. 10-year and 2-year U.S. bond yields fell for the second consecutive day, around 3.72% and 4.56%, respectively.
Looking ahead, USD/CNH traders should pay attention to the release of US consumer price index (CPI) data for May in the days ahead, as the Federal Reserve’s decision on Wednesday is coming soon. It is worth noting that the monthly rate of core inflation predicted by the market has not changed at 0.4%, which has attracted great attention from the market, because if inflation is weak, it may suppress the Fed’s prospect of raising interest rates, which may prevent the Fed from releasing hawks .
