Frances Cheung, head of macro strategy at Westpac, explains that the markets are focusing on the stimulus measures, shrugging off the weak China trade numbers and hopes for an improvement in US-China trade relationship.
“This mentality of weak activities triggering stimulus and pushing for a trade agreement may go on for another couple of weeks, supporting risk assets. Another pressure point may come as we get nearer 1 March. Support for USD/CNY is at the 61.8% retracement of 6.6967, while resistance is at 6.8039.”
“Before December the trend in China’s trade flows had been front-loading of exports and weak imports of upstream goods. The December data suggest that the boost from front-loading faded and it needs some actual reduction in tariffs or concrete improvement in trade-relation to revive external demand.”
“An easing monetary backdrop should keep CNY rates and points soft. Offshore CNH points have fallen rapidly, despite still limited offshore CNH liquidity. With the current offshore-onshore point spreads, back-end CNH points are unlikely to rebound before CNY points do.”
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