USD/CNH seeks support around 6.8800 as Chinese Retail Sales justify expectations

• USD/CNH is gauging support around 6.8800 as China’s retail demand matches consensus.
• S&P500 futures have registered marginal losses in the Asian session after truck-load gains on Tuesday.
• Weak auto sales numbers and stagnant gasoline demand indicate a contraction in US Retail Sales figures.

The USD/CNH pair is gauging a cushion around 6.8800 as China’s National Bureau of Statistics (NBS) has reported flat Retail Sales (Feb) data. The economic data has expanded by 3.5%, in line with the consensus and solid than the prior contraction of 1.8% on an annual basis. It looks like retail demand is recovering after the rollback of pandemic controls by the Chinese administration.

Apart from that, annual Industrial production (Feb) has landed at 2.4%, lower than the estimates of 2.7% but higher than the former release of 1.3%.

The US Dollar Index (DXY) has failed in extending its recovery above 103.80 and has dropped again, portraying a capped upside amid the risk-appetite theme. A spree of United States inflation softening has trimmed the appeal for the USD Index dramatically. The USD Index looks vulnerable above 103.50 and soaring expectations for a less-hawkish monetary policy by the Federal Reserve (Fed) would drag it further for fresh lows.

S&P500 futures have registered marginal losses in the Asian session after truck-load gains on Tuesday as investors cheered the declining US inflationary pressures. Also, accelerating odds of a smaller rate hike from Fed chair Jerome Powell has trimmed fears of a recession in the US economy.

Meanwhile, the return on 10-year US Treasury bonds has trimmed marginally to 3.67% as odds for a 25 basis point (bps) rate hike have escalated further. As per the CME FedWatch tool, more than 82% chances indicate a push in the interest rate to 4.75-5.00%.

For further guidance, monthly US Retail Sales (Feb) data will be keenly watched. According to the estimates from NBF, “Car dealers likely contributed negatively to the headline number, as auto sales fell during the month. Gasoline station receipts, meanwhile, could have stayed more or less unchanged judging by the stagnation in pump prices. All told, headline sales could have contracted 0.7%, erasing only a fraction of January’s gain. Spending on items other than vehicles could have fared a little better, retreating just 0.5%.”