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.

Sino‑EU deal and tariffs ease headwinds

"The trade detente, if formalised at the EU leaders' summit this week, would reduce one of the more significant external headwinds facing China's export-oriented manufacturing sector."

"Combined with the previously reported US-China agreement on a 30-for-30tariff reduction framework, the diplomatic backdrop is incrementally more supportive for Chinese trade flows heading into year-end."

"Markets will watch closely whether the EU safeguard mechanism, which reportedly remains the preferred enforcement tool, is structured in a way that preserves Chinese market access or functions as a de facto import cap."

"The outcome will have direct implications for China's current account trajectory and, by extension, the PBoC's tolerance for yuan appreciation."

"In FX, both USD-CNY and offshore USD-CNH fell 110 pips to 6.69 and fell 130 pips last week."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)