Chinese Yuan: Trade détente and PBoC fix support Yuan – Commerzbank
Commerzbank analysts highlight that Beijing’s new trade agreement with Brussels, alongside a US–China tariff framework, modestly improves China’s external backdrop. They note the PBoC’s USD/CNY fixing model points to a slightly stronger Yuan and that both USD-CNY and USD-CNH fell to 6.69 last week, as easing trade tensions reduce headwinds for China’s export sector and current account.
Commerzbank analysts have observed that China’s new trade agreement with Brussels, combined with a US-China tariff framework, has led to a slight improvement in China’s external environment. The People's Bank of China (PBoC)’s USD/CNY fixing model suggests a modestly stronger Yuan. Both USD-CNY and USD-CNH fell to 6.69 last week, reflecting reduced headwinds for China's export sector and current account due to easing trade tensions.
If formalised at the EU leaders summit this week, the trade detente would alleviate one of the most significant external challenges faced by China's export-oriented manufacturing sector. Coupled with the US-China agreement on a 30-for-30 tariff reduction framework, the diplomatic landscape is increasingly favorable for Chinese trade flows as the year comes to a close.
Market participants will closely monitor whether the EU's safeguard mechanism is designed to maintain Chinese market access or act as a de facto import cap, as this will directly impact China's current account trajectory and the PBoC's willingness to allow yuan appreciation. In foreign exchange markets, both USD-CNY and offshore USD-CNH decreased by 110 pips to 6.69 and fell by 130 pips last week.
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