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The CNY depreciated by 0.1% to 7.2738 per USD after the People’s Bank of China surprised with a 10bps cut in the 7-day repo rate to 1.70%. The central bank also lowered the 1Y and 5Y loan prime rates by the same quantum to 3.35% and 23.85%, respectively, one week after China’s GDP growth slowed to 4.7% YoY in 2Q24 from 5.3% in 1Q24. Despite the worries over China’s economy, property sector, and local government debt, the CNY’s 2.4% YTD depreciation this year was muted compared to the 7% and 10.2% declines in the KRW and JPY, respectively. Despite its steady rise this year, USD/CNY has yet to break out of the 7.10-7.35 range set in June 2023. We have not forgotten USD/CNY’s fall from 7.30 to 7.10 on aggressive Fed cut bets last November-December. The futures market is betting that this Friday’s US PCE deflators will provide the Fed the confidence to deliver 2-3 rate cuts in September-December. We believe USD/CNY will fall to 7.21 by the end of this year on the two Fed cuts we expect later this year. 
AUD/USD peaked at 0.68 on July 11 and fell to 0.6643 on Monday, back inside the 0.6575-0.6700 range seen between mid-May and early July. Apart from China’s uninspiring economy, AUD has been under pressure alongside commodities over the past week due to uncertainties over the US Presidential elections. For example, copper fell 17% from the year’s high of USD505/lb.70 (May 21) to 420 on Monday. However, US equities rallied in the overnight market after US President Joe Biden ended his re-election bid with Democrats uniting behind Vice President Kamala Harris as the party’s nomination to take on Donald Trump at the elections. A less one-sided race to the White House coupled with Fed cuts could weaken the USD and support the AUD later in the coming months.
NZD/USD depreciated by 0.5% to 0.5980 on Monday, its weakest level since May 2. The kiwi has been under pressure after the Reserve Bank of New Zealand’s dovish tilt at its meeting on July 11. The OIS market sees the RBNZ lowering its official cash rate at the remaining three meetings (August 14, October 9, and November 27) this year by a total 75 bps to 4.75%. New Zealand’s CPI inflation is set to return to its 1-3% target band in 3Q24. Headline inflation fell from 4.0% YoY in 1Q24 to 3.3% YoY in 2Q24, its lowest level since 2Q21. Tradeable inflation contracted a third quarter by 0.5% QoQ in 2Q24 vs. 0.7% in the previous quarter. NZD/USD has given back 65% of its rise from 0.5850 (this year’s weakest level on April 19) to 0.6220 (the year’s highest level on June 12). The next support level is around the 75% Fibonacci retracement level of 0.5945, followed by a trendline support level near 0.59, just above this year’s weakest level of 0.5850.
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