The Chinese yuan is struggling for direction against the US dollar as investors comb through disappointing economic data. Asian markets retreated on the numbers, as well as a growing number of COVID-19 infections. Despite the world’s second-largest economy rebounding from the coronavirus pandemic, market analysts and officials are starting to modify their projections downward. What does this mean for the yuan?

According to the National Bureau of Statistics (NBS), retail sales advanced 8.5% year-over-year in July, down from the 12.1% gain in June. This fell short of the 11.5% forecast. It also represented the fourth consecutive monthly drop and was the weakest increase since December 2020.

Retail trade slowed for apparel, cosmetics, jewelry, home appliances, building materials, and furniture. Automobile sales also slumped 1.8%.

Industrial production rose at an annualized rate of 6.4% in July, falling short of the market forecast of 7.8%. This is also down from the 8.3% gain in June and was the worst performance since August of last year. Output declined for textiles, metals, minerals, and transportation equipment.

Home prices also eased in July, rising 4.6% year-over-year in July, down from the 4.7% boost in the previous month. Fixed asset investment year-to-date climbed 10.3% in July, missing the median estimate of 11.3%. This comes after it was reported that foreign direct investment (FDI) advanced 25.5% in July.

On the labor front, the unemployment rate edged up from 5% in June to 5.1% in July.

In addition to economic data, investors are paying close attention to the spread of the coronavirus. Although China’s COVID-19 infections have fallen for six consecutive days, traders are worried about the hundreds of new cases that have been popping up so far this month. In total, China has reported 95,000 infections over the last 18 months, with a death toll of close to 5,000.

Financial analysts are also keeping an eye on the geopolitical powder keg waiting to go off in Afghanistan after the Taliban seized control of Kabul. Rabobank wrote in its daily market commentary:

“Yes, markets will try to brush this geopolitical earthquake off: It’s just Afghanistan; It’s a long way away. This geopolitical nightmare is almost certainly only just beginning.”

Overall, the Asian financial markets slumped on the news, sending US stock indices also lower to kick off the trading week.

The USD/CNY currency pair dipped 0.04% to 6.4747, from an opening of 6.4774, at 16:46 GMT on Monday. The EUR/CNY slipped 0.17% to 7.6275, from an opening of 7.6424.