[MARKET ANALYSIS] G7 FX trade muted, CNH weakens following the stronger fix by the PBoC

The muted G7 FX trade indicates a cautious market as geopolitical tensions weigh on sentiment, particularly in the EU-US dynamic.

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[MARKET ANALYSIS] G7 FX trade muted, CNH weakens following the stronger fix by the PBoC

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  • DXY initially sold off at the start of the APAC session before rebounding back above 98.50 as EU-US tensions remain at the forefront of traders' minds.
  • EUR/USD remain in a tight range following its outperformance in Tuesday’s session, despite a lack of drivers for the euro.
  • GBP/USD oscillates around 1.3440 ahead of the UK inflation report. The ONS released its employment report in Tuesday’s session, which saw the initial upside in cable unwind throughout the session.
  • USD/JPY dips below the 158 handle as the recent turmoil in JGBs briefly calms.
  • Antipodeans trade muted, with the Kiwi consolidating following recent gains.
  • CNH weakens, with USD/CNH returning to the 6.96 handle, initially spurred by the stronger fixing (7.0014 vs prev. 7.0006).
Context

The recent weakness in the CNH following a stronger PBoC fix may raise concerns about China's economic resilience, influencing USD/CNH dynamics and potentially impacting broader FX rates, as traders look for clues on policy and risk appetite.

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