Commitment to USD/CNY stability as part of trade deal likely to imply limited deviation from current levels, says Commerzbank

For USD/CNY, a commitment to currency stability as part of the deal is likely to imply limited deviation from current levels, according to the latest research report from Commerzbank.

The enthusiasm to the phase one trade deal announced last week appears to be fading. USD/CNY is trading just above the 7.00 level once again after dipping over 1 percent last Thursday towards the 6.9600 level.

The market’s ambivalence is understandable given that there are few details. There is also scepticism on whether China can fulfil its commitment on US agriculture purchases. The numbers proposed are that China intends to double US agricultural imports from next year to USD40-50 billion annually from just USD24 billion in 2017, before the trade war began, the report added.

One news outlet reported that some details are emerging on how China plans to achieve this, including removing the tariff on US ethanol. However, this may not make a huge dent as US ethanol exports to China was just above USD300 million in 2016.

"There are also reports that China may re-route some trade to the US away from Hong Kong to the mainland. Some estimates are that this could amount to USD10 billion. Overall, we are still waiting for more concrete details," Commerzbank further commented in the report.