The USD/CNH exchange rate has slipped as China announces plans for additional stimulus to support its economy, countering the impact of measures introduced earlier this week. During Thursday’s European trading session, the USD/CNH pair hovered around 7.00. The People’s Bank of China (PBoC) set the USD/CNY central rate for the session at 7.0354, up from Wednesday’s fix of 7.0202 and aligning closely with Reuters’ estimate of 7.0367.
China is poised to inject over CNY 1 trillion into its largest state banks, which are grappling with shrinking margins, declining profits, and a rise in non-performing loans. This marks the first significant capital infusion of its kind since the 2008 global financial crisis.
Meanwhile, the US Dollar is facing downward pressure amid increasing expectations for further interest rate cuts by the US Federal Reserve. The CME FedWatch Tool indicates that markets are pricing in about a 50% likelihood of a total reduction of 75 basis points, bringing rates to a range of 4.0-4.25% by year’s end.
Federal Reserve Governor Adriana Kugler expressed strong support for last week’s decision to lower interest rates by half a point. She noted that further rate cuts may be appropriate if inflation continues to ease as anticipated, according to Bloomberg.
Traders are also eyeing the release of the final US Gross Domestic Product (GDP) Annualized figures for the second quarter, which are set to be published later in the North American session.
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