Ella 
USD/CNH gave up the previous day’s gains and fell to around 7.27 in Asia on Friday. The pair came under downward pressure on upbeat macro data from China.
A report released by the National Bureau of Statistics of China showed that retail sales increased by 4.6% year-on-year in August, which was expected to be 3.0% and the previous value was 2.5%. In addition, industrial production increased by 4.5%, after increasing by 3.7% in July.
These positive economic indicators have been accompanied by China’s expansion of stimulus measures, leading to upbeat market sentiment and pressure on USD/CNH.
The People’s Bank of China (PBoC) has taken action to cut the reserve requirement ratio (RRR) by 25 basis points (bps) for most institutions in the banking system. This is the second cut in the reserve requirement ratio this year and is expected to inject more liquidity into the economy, potentially boosting growth in the world’s second-largest economy.
China’s actions to expand liquidity and support economic growth are worthy of attention, but the trend of the US dollar is still affected by the Fed’s policy stance, which may become a supporting factor for USD/CNH bulls.
The U.S. Dollar Index (DXY), which measures the greenback’s performance against six other major currencies, is currently trading near the six-month high hit on Thursday. At the time of writing, spot prices are hovering around 105.30.
Upbeat U.S. economic data boosted the dollar. The latest data showed that the number of initial jobless claims increased by 220,000 in the week ended September 8, which was better than the 225,000 expected. The previous value was 217,000.
The U.S. core PPI in August was in line with expectations, growing 2.2%, slightly lower than the previous value of 2.4%. In addition, retail sales increased by 0.6%, compared with the previous value of 0.5%, which exceeded market expectations for a growth of 0.2%.
However, CME Group’s FedWatch tool shows a 35% chance of the Fed raising interest rates by 25 basis points in November. That likely reinforced market caution about such a move, as traders carefully assess the economic outlook and communications from the Fed.
Market participants will release the preliminary value of the University of Michigan Consumer Confidence Index during the North American session. A slight decline to 69.1 is expected from 69.5.
Once the data is in line with or higher than expected, it may boost the dollar and allow it to maintain its upward momentum. The data provides information on consumer confidence and can influence market sentiment and dollar trading decisions.
