JPMorgan Chase’s new China-US endgame puts yuan at decade lows
The new baseline on the trade war also 'raises questions for the world’s most expensive equity market (US) and one of its cheapest (China)'
With little prospect of a restart for US-China trade talks, JPMorgan Chase now expects an escalation in tension that will lead to higher American tariffs on all Chinese imports, sending the yuan sliding to its weakest against the dollar in more than a decade. “JPMorgan has adopted a new baseline that assumes a US-China endgame involving 25% US tariffs on all Chinese goods in 2019,” JPMorgan strategists including John Normand wrote in a note Friday. While growth forecasts for both the US and China are not much affected, thanks in part to Chinese stimulus measures, “a weaker yuan becomes part of the new equilibrium”, they wrote. The People’s Bank of China will probably pursue a looser monetary policy to shore up growth in face of the threats to trade, and probably will not intervene much to counter resultant downward pressure on the yuan, according to the JPMorgan analysis. The bank now expects the yuan to drop to 7.01 to the dollar by the end of December and 7.19 by September 2019, a...
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