Week Ahead FX outlook:
Key FX views:
China's overall economic activity slowed in August, with industrial value-added, fixed asset investment and retail sales growths falling short of expectations, and housing sector remaining a drag. On September 17, the State Council Information Office held a press conference to introduce the relevant policy measures for expanding service consumption. However, fiscal spending slowed for the second consecutive month in August, potentially indicating that the debt burden is limiting the scope for policy expansion, reducing the likelihood of another large-scale fiscal stimulus this year. This set of weak data didn’t pressure much on CNY, amid Fed’s 25bps rate cut. The USD/CNY edged slight lower to 7.114, and as the pair approaches 7.10, the return from holding US dollars this year maybe no longer sufficient to offset the cost brought about by exchange rate fluctuations, this might motivate Chinese companies to convert foreign exchange into RMB, if the expectation of CNY appreciation heats up. Chinese and American officials held a new round of economic and trade talks in Madrid, and the two sides reached a framework consensus on the TikTok issue. But the US and China trade talks still exist large uncertainties. China has not purchased any new US soybeans at the start of its export season for the first time in more than two decades, it may indicate that Beijing is using agricultural trade as leverage in its trade fight with Washington.
Looking ahead, Federal Reserve Chairman Powell will deliver a speech on the economic outlook. China's loan prime rate (LPR) will be released and is expected to remain unchanged for the fourth consecutive month. Economic data to watch include the US personal consumption expenditure price index, Eurozone and US purchasing managers' indexes, Chinese industrial profits, Taiwan's export orders, Thailand trade numbers and Singapore IPs.
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