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  • USD/CNH opened the week higher and hit a 3.5-month high of 6.8140 on Trump’s China trade threat.  
  • Trump tweeted on Sunday that he would raise tariffs on Chinese goods to 25%, reviving trade war fears.  

USD/CNH gapped has gapped higher in Asia to print the highest level since Jan. 23 on Trump’s renewed China trade threat.

The currency pair hit a high of 6.8140, having opened at 6.7847 – well above Friday’s close of 6.7334 – and was last seen trading at 6.8049.

Trump warned Sunday that he would raise tariffs Friday on Chinese goods to 25% from the current 10% threshold, reviving trade war fears. The President added further that talks on a US-China trade deal are moving “too slowly”.

Trump’s threat has apparently not gone down too well with Beijing. As per latest reports, China is considering canceling trade talks with the US and may not send a trade delegation led by Vice Premier Liu He to Washington on Wednesday.

The renewed threat of full-blown trade war has sent the offshore Chinese yuan (CNH) to multi-month lows. The S&P 500 futures are currently down 51 points or 1.73%, while the safe-haven Japanese Yen is better bid.

Looking forward, the USD will likely remain on the offensive on heightened trade war fears. The downside pressure on the CNH may increase if China’s services PMI, due for release at 01:45 GMT, misses estimates.

Pivot points