Something for your Espresso: Things are heating up in USDCNY (again)!
If the Biden admin moves the needle first in the flared-up trade conflict, China may decide to let go of the USD/CNY exchange rate in response. Things are heating up again!
Good morning from Greece!
We have seen volatile trading in Chinese equities this morning as markets try to assess the risk of policy action in the trade-war in the week ahead.
The price action of e.g. the Hang Seng Enterprise Index is getting (very) stretched to say the least and with potential tariffs being announced this week, weak key figures from China on Friday and/or a hot US inflation report on Wednesday, we are NOT willing to chase Chinese risk assets higher here.
Chart 1: Our PCA model fair value for HSCEI
If the Biden admin moves the needle first in the flared-up trade conflict, China may decide to let go of the USD/CNY exchange rate in response. Things are heating up again!
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