USD sold as PBOC intervene

Market reports
Thanim Islam
  • USD weaker to start the week ahead of Jackson Hole
  • UK tax cuts on the way?


Markets were very steady yesterday with both USD and GBP indices marginally unchanged on the day, and the EUR index a touch higher. 2-year yields on US and UK government bonds climbed steadily as well.

Data this morning showed that UK government borrowing came in under expectations between April and July, which may provide potential room for Chancellor Jeremy Hunt to cut taxes. Welcome news for Sunak and the Conservatives who are currently trailing the Labour party by 20 points in opinion polls, ahead of a widely expected general election next year.


Market rates

* Daily move - against G10 rates at 7:30am, 22.08.23

** Indicative rates - interbank rates at 7:30am, 22.08.23

Data points


  • None today.

Our thoughts

The People's Bank of China intervened in currency markets once again to stop the sell off of CNY, particularly versus USD, resulting in broad USD weakness in markets. However, any weakness seems likely to be short lived on the greenback, particularly ahead of PMI data due out tomorrow and the Jackson Hole meet on Friday, and thus buyers of USD would do well to take advantage of this short-term move.

For the rest of the day, we have existing home sales figures from the US and FX markets, which will likely take cues from the broader risk appetite in the markets.

Chart of the day

CNY has been on the back foot so far this year on the back of a weakening outlook for the Chinese economy. The People's Bank of China has made numerous attempts to stem the sell-off on CNY, but any intervention has been short-lived and whilst USDCNY is at its weakest since 2008, the likes of JP Morgan Chase & Co, Nomura Holdings Inc., and UBS all predict further weakness on the currency this year.

Source: Bloomberg Finance L.P.

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