Global Q2-23 Outlook Podcast – What lies beneath

What the desk is arguing

The desk argues that the resurgence of China's economy post-COVID-19, while promising, may not translate uniformly across all sectors, potentially leading to volatility in FX markets. Per the full note from Standard Chartered, this disparity in growth could create divergent trends in currency performance, particularly as traders reassess their positions in light of these emerging narratives.

Supporting this view, recent data indicates that China's GDP growth is rebounding, with estimates suggesting a rise of approximately 5.5% for 2023. However, the desk emphasizes that not all sectors are benefiting equally, which could lead to sector-specific currency movements that traders need to monitor closely.

Where it sits in our coverage

Our consensus target for the USD/CNY pair is set at 1.075, with a range of 1.04 to 1.12. Key firms contributing to this outlook include: - jpmorgan: Target of 1.10 for Mar-26 - bofa: Target of 1.04 for Mar-26

This view aligns with jpmorgan, which reflects a bullish stance on the yuan's potential strength, while bofa offers a more cautious perspective, indicating a divergence in sentiment among major players.

How other firms see it

Firms aligned with the desk's view, such as jpmorgan, are optimistic about the yuan's performance, suggesting that the growth in China will bolster its currency. Conversely, bofa remains skeptical, highlighting potential risks associated with uneven growth that could undermine the yuan's strength.

Traders should keep an eye on the USD/CNY dynamics as they could be influenced by China's economic indicators and the PBOC's monetary policy adjustments, which are critical in shaping market sentiment.

What the calendar says

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