USDCNH Analysis 31-July-2024
The offshore yuan improved to about 7.22 per dollar (USD/CNH)after initially having trouble finding direction earlier in the session. This boost came after China’s leaders made promises at a Politburo meeting to take more actions to stabilize market confidence and achieve the year’s growth goals.
USDCNH Analysis 31-July-2024
During Tuesday’s meeting, China’s top decision-makers said that the remaining economic stimulus for the year will focus more on increasing consumer spending rather than on infrastructure projects. This shift aims to boost domestic demand by raising people’s incomes and improving social welfare.
Additionally, official data showed that manufacturing activity shrank for the third month, dropping to 49.4 in July 2024. This is the steepest decline since February, caused by weak demand, falling prices, a troubled property sector, and job insecurity.
In contrast, the services sector continued to grow for the nineteenth consecutive month, though at a slower rate, decreasing slightly to 50.2 in July from 50.5 in June, marking the slowest growth since November 2023.
For those unfamiliar with these terms, the “offshore yuan” refers to the Chinese currency traded outside mainland China, mainly in Hong Kong, which can influence global investors’ confidence.
The Politburo is a group of the highest-ranking officials in China who make significant policy decisions. When they talk about “stimulus measures,” they’re referring to actions taken by the government to encourage economic growth, such as investing in projects or providing financial aid to citizens.
The “contraction in manufacturing activity” means that factories are producing less, a sign of an economic slowdown. A measure below 50 indicates shrinking activity, while above 50 implies growth.
The service sector’s slight decline still shows growth but at a reduced pace. The government’s focus on consumer spending aims to help people have more money to buy goods and services, which can drive economic growth more sustainably than temporary infrastructure projects.
