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CNH: USD/CNH Back Above 7.3100 On Tariff Risks

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USD/CNH sits modestly higher in early Monday dealings, the pair last above 7.3100 (session highs rest at 7.3163). Early USD impetus has been given a boost by Trump tariff headlines, which stated that 25% tariffs will e imposed on Monday for all steel and aluminium imports. No timeline was specified on when they would come into effect though (per BBG). Spot USD/CNY finished Friday just near 7.2950, the highest closing level since Trump's inauguration on Jan 20. The CNY CFETS basket tracker slipped to 100.55 on Friday, lowest levels since mid Dec last year.

  • China steel exports to the US are smaller than other major economies, but it is still major aluminium exporter to the US (at least in a relative sense, with Canada the largest). The USD amount of aluminium exports is not large though relative to total exports of China.  
  • There is also the reciprocal tariff threat that Trump made last week, which would reportedly apply to all countries. An announcement on this is expected this week, although how China would fare is unclear. BBG notes average tariff levels imposed by China have come down a lot since it entered the WTO back in 2001.
  • On Sunday, we had the China Jan inflation figures print, which showed slightly stronger headline and a further pick up in core inflation. Core y/y is now 0.60%y/y, up from recent cycle lows of 0.10% (Sep 2024). This is less deflationary fears at face value, although Jan may have been aided by seasonal spending related to LNY.
  • Focus data wise this week will be on the Jan new loans/aggregate finance figures. 
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USD/CNH sits modestly higher in early Monday dealings, the pair last above 7.3100 (session highs rest at 7.3163). Early USD impetus has been given a boost by Trump tariff headlines, which stated that 25% tariffs will e imposed on Monday for all steel and aluminium imports. No timeline was specified on when they would come into effect though (per BBG). Spot USD/CNY finished Friday just near 7.2950, the highest closing level since Trump's inauguration on Jan 20. The CNY CFETS basket tracker slipped to 100.55 on Friday, lowest levels since mid Dec last year.

  • China steel exports to the US are smaller than other major economies, but it is still major aluminium exporter to the US (at least in a relative sense, with Canada the largest). The USD amount of aluminium exports is not large though relative to total exports of China.  
  • There is also the reciprocal tariff threat that Trump made last week, which would reportedly apply to all countries. An announcement on this is expected this week, although how China would fare is unclear. BBG notes average tariff levels imposed by China have come down a lot since it entered the WTO back in 2001.
  • On Sunday, we had the China Jan inflation figures print, which showed slightly stronger headline and a further pick up in core inflation. Core y/y is now 0.60%y/y, up from recent cycle lows of 0.10% (Sep 2024). This is less deflationary fears at face value, although Jan may have been aided by seasonal spending related to LNY.
  • Focus data wise this week will be on the Jan new loans/aggregate finance figures.