USD/CNH struggles around 7.20, focus shifts to PBOC policy

• USD/CNH is facing barricades around 7.22 as the DXY has weakened amid the risk-on profile.
• Considering the zero Covid-19 policy and underperformance of real estate, the PBOC could sound dovish.
• China’s major state-owned banks have been spotted selling US dollars in the spot market.

The USD/CNH pair is hassling in overstepping the critical hurdle of 7.2200 in the early European session. The asset is oscillating in a tight range despite the risk-on impulse in the market. The US dollar index (DXY) is oscillating near the round-level cushion of 113.00 and is expected to surrender the same amid a decline in safe-haven's appeal.

The DXY is performing vulnerable despite the soaring odds of a bigger rate hike by the Federal Reserve (Fed). Mounting price pressures in the US economy are impacting the US economy and have left no other option for the Fed than to tighten policy measures further.

Investors have shifted their focus toward the major event of an interest rate decision by the People’s Bank of China (PBOC). The monetary policy is due on Thursday and a dovish stance is expected. The Chinese economy is facing major headwinds of zero Covid-19 policy to contain the epidemic and vulnerable real-estate sector due to bleak demand.  

Meanwhile, statements from six banking sources claim that China's major state-owned banks were spotted swapping yuan for U.S. dollars in the forwards market and selling those dollars in the spot market on Monday morning.

Apart from that, the economy will also release the Gross Domestic Product (GDP) data on Tuesday. As per the preliminary estimates, the annual GDP data will improve significantly to 3.4% vs. the prior release of 0.4%. On a quarterly basis, the economy will report an expansion in growth rate by 3.5% vs. a contraction of 2.6% reported earlier. The crucial economic events will keep the asset on the tenterhooks.