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Yuan pressured by expectations for slower credit growth

Markets look ahead to July data, with M2 growth forecast to ease to 7.9% year over year, potentially increasing pressure on the PBoC to deliver more targeted easing.

Reported · Written up by our desk · Major Pairs

Commerzbank analysts Charlie Lay and Dr. Henry Hao said USD/CNY has been steady around 6.75, while their model suggests the PBoC could set a slightly stronger midpoint fix.

FXStreet also highlights expectations that China’s July credit and money supply releases will point to modest easing. Consensus calls for M2 growth to slip to 7.9% year over year from 8.0% in June, and for M1 to edge down to 3.9% from 4.0%.

Aggregate financing on a year-to-date basis is expected to rise to CNY21.9tn versus CNY20.8tn in June, but new yuan loans outstanding are forecast to tick down slightly to CNY10.6tn from CNY10.7tn.

The analysts argue that a weak July credit print would reinforce subdued private borrowing and raise pressure on the PBoC to implement further, more targeted monetary easing. They also note the central bank has framed policy as more flexible, with the seven-day reverse repo rate remaining the primary policy anchor.

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