USD/CNH firms near resistance as China's stock index rebounds amid weak growth outlook - BBH

USD/CNH is firmer just under key resistance at 7.2000 and China's stock index extended its rebound, BBH FX analysts report.

USD/CNH firms near resistance as China's stock index rebounds

"China's S&P Global Services PMI rose to a 14-month high at 52.6 in July vs. 50.6 in June driven by higher new business. In contrast, China's S&P Global Manufacturing PMI - released last week - dropped to 49.5 in July vs. 50.4 in June, dragging the S&P Global China Composite PMI down to a two-month low at 50.8 vs. 51.3 in June."

"China's growth outlook remains soggy. China must shift its growth model toward one in which domestic consumption plays a greater role. However, three major structural constraints prevent any meaningful effort to increase the role consumption plays in China's economy: low household income levels, high precautionary savings, and high levels of household debt."

"As such, China will continue to lean heavily on infrastructure to hit its growth target. This is good for commodity prices but bad for China's long-term economic health."