US-China Trade War Update – USD/CNH Above 7.0000
- The US-China trade war took a turn for the worse last week when the Federal Reserve did not cut its main interest rate by 50-bps. In escalating the US-China trade war, the US president cultivated a situation where, out of concern about the potential negative impacts to the US economy, the Federal Reserve would cut rates again.
- In allowing USDCNH to trade through 7.000 for the first time in the history of the offshore market, Chinese President Xi Jingping has officially put FX intervention into the field of the play as a policy response to the US-China trade war.
- Total depreciation needed by the Chinese Yuan to fully offset the 25% tariffs on $300 billion of goods is 5% from where it opened markets on Friday. Or, USDCNH should hit at least 7.3000 if US PresidentTrump escalates the trade war further.
Looking for longer-term forecasts on Gold and Silver prices[1][2]? Check out the DailyFX Trading Guides.[3]
Moments after this note was published on Monday, August 5, the US Treasury officially labeled China as a currency manipulator for the first time since 1994 in response to allowing USDCNH to trade through 7.0000.
The US-China trade war took a turn for the worse last week when the Federal Reserve did not cut its main interest rate by 50-bps. Consider this: US President Donald Trump has, for many weeks, castigated the Federal Reserve and Chair Jerome Powell for their decision to hike rates last year, and the US president went so far as to ask for “100-bps” of cuts in the days ahead of the July Fed meeting.
In the hours
