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Michael Every Senior Asia-Pacific Strategist at Rabobank, points out that this morning USD/CNH is trading at 6.87 at time of writing, as the threat of further 25% US tariffs weighs on the Chinese currency.

Key Quotes

“US Commerce Secretary Ross has also stated Ross Signals More Tariff Pain Ahead in China Trade Battle when he stated on TV: “We have to create a situation where it’s more painful for them to continue their bad practices than it is to reform”¦The reason for the tariffs to begin with was to try and convince the Chinese to modify their behaviour. Instead they have been retaliating. So the president now feels that it’s potentially time to put more pressure on”¦”

“It is perhaps no coincidence that the US Congress just passed a bill banning (not putting tariffs on) the US government use of products from China’s Dahua and Hikivision from H2 2019. Given we are just 8 big figures, and a little over 1%, shy of my revised end-year USD/CNY target of 6.95, the pressure is clearly on that forecast too – though I have been as public as Ross in saying that it always represented an optimistic case, and that ultimately it is when we go through 7, and 8, not if – and that is all down to politics.”