USD/CNY gained nearly 220 pips last week to above 7.26 despite the softer greenback. The yuan is set to remain under pressure after softer China PMI, economists at Commerzbank report.

Downside surprise to PMIs

“The official manufacturing PMI fell to 49.2 in October (Bloomberg consensus: 49.8) vs 50.1 in September. The official non-manufacturing PMI, which includes services and construction, also fell sharply to 48.7 in October, much weaker than consensus expectations of 50.1 and vs 50.6 in September.”

“Private sector activity, especially in services, will remain under pressure in the near term as the zero-Covid policy and property slump persist. Fiscal stimulus through infrastructure investment and robust activity in the government-supported strategic industries such as electric vehicle and high-end equipment manufacturing will offset growth weakness to some extent.”

“CNY could remain under pressure as the PMIs continue to point to economic weakness.”