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VIEW: On Thursday TD wrote that "Chinese......>

CHINA
CHINA: VIEW: On Thursday TD wrote that "Chinese data continues to decelerate
rapidly & we do not expect a near term change in this dynamic. This may
increasingly generate pressure &  exp. for an aggressive shift in the mon &
fiscal pol reaction functions, which could be problematic for CNY. This is not
our base case & we exp. that while the policy response is shifting more
proactively, it will remain nuanced & targeted. A much more aggressive Chinese
rates-based response remains possible however, but depends on the global macro
context & pivoting particularly on the Fed's stance & broad USD performance.
Trade negotiations with the U.S. will play a role, and the incentives for both
sides to come to an agreement, even if only superficial, are strengthening.
Acknowledging the -ve impact of the recently re-priced Fed outlook & government
shutdown on the USD, we have also revised our USDCNY forecast lower, but see
near term upside risks from here. We see USDCNY being pushed to 6.90 by end of
Q2, but then recover to 6.70 by end of '19 (vs. 7.00 prev), and 6.30 by end of
'20 (vs. 6.60 prev). We still believe that the topside remains a risk for USDCNY
in the near term, but dependent on the trade war resolution with the U.S."
MNI London Bureau | +44 0203-865-3809 | anthony.barton@marketnews.com
MNI London Bureau | +44 0203-865-3809 | anthony.barton@marketnews.com

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