Global FX: Central Bank Central
At Any Rate
China's Counter-Cyclical Policy and CNY Weakness
- China's focus on "extraordinary counter-cyclical policy support" signals a shift towards looser fiscal and monetary policies.
- This includes increased government spending and potential cuts to RRR and OMO rates by the PBOC.
- The anticipated CNY weakness is part of a broader government strategy to mitigate the impact of tariffs, combining fiscal, monetary, and FX tools.
- Market consensus suggests a dollar-CNY exchange rate target of 7.50 to 7.60.
- The lack of specific details from the Central Economic Work Conference led to market disappointment.
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