Despite a positive Caixin Manufacturing PMI, USD/CNH recovers from 7.3300

The USD/CNH pair exhibited a V-shaped turnaround after falling to about 7.3300 during the Tokyo trading session. Despite the publication of optimistic Caixin Manufacturing PMI data, the asset has experienced a comeback. The economic statistics came in at 49.2 versus forecasts of 49.0 and the previous reading of 48.1.

Earlier, the National Bureau of Statistics revealed that China's official Manufacturing PMI fell to 49.2 from 50.0 and 50.1, as had been expected (NBS). In addition, the Non-Manufacturing PMI was much lower at 48.7, compared to estimates of 51.9 and the previous publication of 50.6.

In the meantime, the US dollar index (DXY) has fallen substantially in Tokyo as the risk-on drive has strengthened. The DXY has fallen dramatically to approximately 111.36. After a negative Monday, S&P500 futures have rebounded sharply on the back of optimism around the quarterly earnings season.

Despite increasing hawkish Federal Reserve (Fed) wagers, returns on US government bonds have declined. At the time of writing, the 10-year US Treasury yield has decreased to 4.04%, which is 0.90% below its previous level.

This week's primary catalyst will be the Federal Reserve's interest rate decision. As inflationary pressures have not yet shown signs of abating, it is anticipated that the US central bank will raise interest rates for the fourth time by 75 basis points (bps). However, consumer expenditure in the third quarter decreased to 1.4% from 2.0% in the previous quarter, which may weigh on the inflation rate.