THE DAILY REPORT
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RISK EVENTS (Medium)
JPY – Retail Trade
GBP – Budget Report
GBP – Mortgage Approvals
USD – Core Personal Consumption Expenditure
Major Bloomberg & Reuters News
China: Yuan exchange rate likely to maintain a weak trend in the coming months - BBVA
“The drivers to the recent RMB sharp depreciations after the appreciation trend from April 2017 to April 2018 including the following factors: (i) Escalation of the trade war with the US; (ii) Strong DXY performance; (iii) Domestic economic slowdown; (iv) Easing monetary measures to offset trade war risks, leading the interest rate difference with the US expanded.
Continuing depreciation pressure will be last for the following months, due to the unsettled trade war and domestic growth slowdown. In addition, FED interest rate hike will also add pressure on RMB. However, we do not think RMB exchange rate will depreciate above the psychological level at 7, due to the PBoC has more experience to intervene the market and does not want domestic financial turmoil again as 2015. Under the current circumstance, the equilibrium exchange rate should be in a range of 6.7-7. In the future, RMB exchange rate flexibility will be further enhanced, as exchange rate reform deepened. All in all, economic fundamentals of RMB
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