J.P. Morgan have revised their USD/CNY...>

CHINA YUAN: J.P. Morgan have revised their USD/CNY forecast higher to CNY6.80 in

Q419 & Q120 (prev. CNY6.65). J.P.M write "the new tariffs represent a new

regression in trade discussions, which had been making progress according to

both U.S. & Chinese officials. Probabilities of a negative outcome to trade

talks have increased as a result of the imposition of new tariffs. Previous

tariffs hit Chinese capex, regional supply chains & exports, with exports from

China to the U.S. declining. While our forecasts previously predicted a

normalisation in Q219 on the back of positive trade developments, recent

developments may cause a further decline in China exports to the U.S. China has

some policy buffers which could counter the impact of higher tariffs. The scope

for retaliatory tariffs is limited (China has already imposed tariffs on 85% of

imports from the U.S.). A number of tax rebates & monetary easing have already

been introduced, but China could; increase symbolic tariffs for imported U.S.

goods, accelerate the rollout of fiscal subsidies to support local consumption

(in home appliances & autos), further RRR cuts, credit easing & possibly a

weaker CNY."