Yuan Up On Optimism Over Pending Xi-Trump Meeting

Yuan Up On Optimism Over Pending Xi-Trump Meeting
June 19, 2019


The Chinese yuan reversed trend yesterday by rallying against multiple major currencies, aided by robust housing prices and retail sales in May. Even though the industrial output and fixed asset investment data did not meet analysts’ estimates, the figures were still appreciable considering the trade-related tussle it has with the US. The USD/CNY currency pair fell nearly 0.35% to 6.89295, after the opening of 6.9259.

As per the National Bureau of Statistics (NBS), the average price of newly built houses in 70 Chinese cities jumped by 10.7% year-on-year in May, comparable to the level in April. Economists had forecast a growth of 11%. The most significant gains were recorded in Shenzhen (1.2%), Shanghai (1.7%), Beijing (3.9%), and Guangzhou (12.2%). On a m-o-m basis, in May, prices of a new home increased 0.7%, reflecting the biggest rise in five months.

Economists attribute the gains to the relaxation of rules by the Chinese government in small towns, and the decision to slash interest rates while boosting lending by the People’s Bank of China (PBOC).

Last Friday, Chinese government data indicated 8.6% m-o-m in May retail sales, an increase from 7.2% in April and above economists forecast of 8% growth. Jewelry (4.7%), home appliances (5.8%), furniture (6.1%), telecoms (6.7%), and cosmetics (16.7%) recorded the biggest growth. Industrial production in May rose 5%, a slight decrease from 5.4% growth registered in the previous month. Analysts had anticipated the industrial production to remain unchanged from April. Likewise, fixed asset investment increased 5.6% in May, but declined from the 6.1% growth registered in the earlier month. The figures missed the 6% increase anticipated by the market.

In the meantime, US President Donald Trump has revealed plans for an “extended” meeting with his Chinese counterpart Xi Jinping at the G20 summit scheduled to be held in Osaka-Japan next week. The financial markets reckon it as a notable development in efforts to resolve the ongoing trade spat between China and the US.

Trump, while speaking to media at the White House yesterday, stated that the US and Chinese negotiators would restart discussions today.

Notably, Trump is optimistic about the upcoming talks with Xi. Trump said, “I have a very good relationship with President Xi. We’ll see what happens. I think we have a chance. China wants a deal. They don’t like the tariffs.”

Regarding the telephonic conversation with Xi, Trump said, “Had a very good telephone conversation with President Xi of China. We will be having an extended meeting next week at the G-20 in Japan. Our respective teams will begin talks prior to our meeting.”

The overall positive sentiment is anticipated to keep the yuan bullish in the short-term.

CNY - technical analysis - 19th June 2019

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Janine is our editor for related stock market news. Andrew and Janine will be focusing on providing the latest trends and where the next hit could be

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