USD/CNH refreshes yearly high at 6.9320 as market mood sours, US NFP in focus

• USD/CNH has printed a fresh two-decade high at 6.9320 on the risk-off market mood.
• The odds of a higher Fed-PBOJ policy divergence will keep up the asset’s upside momentum.
• As per the consensus, the US NFP may decline to 290k. vs. 528k recorded earlier.

The USD/CNH pair is ramping up dramatically and has printed a fresh yearly high at 6.9320 in the Asian session. The asset is picking up significant bids as the hawkish tone adopted by Federal Reserve (Fed) chair Jerome Powell at Jackson Hole Economic Symposium underpinned negative market sentiment. The asset is advancing vigorously right from the first tick of the trading session.

After deciding to favor fixing inflation chaos over growth forecasts and the ongoing dent in the economic activities by Fed’s Powell, risk-perceived currencies faced the headwinds of heated market mood. As Fed will continue its path of hiking interest rates at the current pace to scale down the inflationary pressures, the slowdown fears will continue to accelerate in the US markets.

On the economic data front, investors are shifting their focus on the US Nonfarm Payroll (NFP) data, which will release later this week. As per the market consensus, the US economy generated 290k fresh jobs in August against the prior release of 528k. It is worth noting that the US employment data has not disappointed yet to Fed Policymakers, even this time, the NFP could continue its upbeat cycle.

On China’s front, investors have started worrying over a rebound in the number of Covid-19 cases. Headlines from Reuters that China has reported 1,344 new asymptomatic coronavirus cases in the mainland on Aug 28 vs. 1,137 a day earlier has triggered lockdown fears to contain the spread.

Apart from that, expectations for further divergence in Fed-People’s Bank of China (PBOC) policy will keep the asset stronger. The PBOC is bound to deploy higher liquidity into the economy to spurt the growth rates. Also, the central band trimmed its one-and five-year Prime Lending Rates (PLR) by five and 15 basis points (bps) last week.