{"id":149489,"date":"2019-06-12T10:59:53","date_gmt":"2019-06-12T14:59:53","guid":{"rendered":"https:\/\/www.countingpips.com\/?p=149489"},"modified":"2019-06-12T10:38:57","modified_gmt":"2019-06-12T14:38:57","slug":"trade-war-risks-prompt-more-chinese-stimulus","status":"publish","type":"post","link":"https:\/\/www.investmacro.com\/forex\/2019\/06\/trade-war-risks-prompt-more-chinese-stimulus\/","title":{"rendered":"Trade War Risks Prompt More Chinese Stimulus"},"content":{"rendered":"
June 12, 2019<\/div>
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By <\/strong>Orbex<\/strong><\/a><\/p>\n

Trump Takes Positive Side Away<\/strong><\/h1>\n

Up until now, it has been unclear whether the failure to reach a trade agreement between the US and China was attributed to China\u2019s lack of experience when it comes to trade matters.<\/p>\n

Sources close to officials have said that the US has always had an edge on trade issues, at least between the US and Chinese delegates, and that the\u00a0Chinese have limited experience in dealing with trade disputes<\/strong>.<\/p>\n

But still, there has not been an official reason for the failure of the deal.<\/p>\n

In a new statement on the White House lawn, however, and regardless of Chinese officials\u2019 lack of experience in international law,\u00a0Trump stated that it, was not, in fact, the Chinese who are holding back the deal<\/strong>. The president affirmed:<\/p>\n

\u201cChina is a major competitor, and right now China wants to make a deal very badly. It is me right now that is holding up the deal. And we\u2019re going to either do a great deal with China or we\u2019re not going to do a deal\u201d<\/em><\/p><\/blockquote>\n

Trump\u2019s comments\u00a0took away some of the positive\u00a0US-Mexico vibes<\/a>\u00a0from the markets.\u00a0<\/strong>He\u00a0reiterated that a deal needs to happen, but only as long as China respects the US\u2019 earlier\u00a0demands.<\/p>

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China Stimulates Again as Trade War Lingers<\/strong><\/h1>\n

The Chinese government\u00a0moved into easing mode<\/strong>\u00a0back in July last year. In fact, it has done so every single month of the second half of 2018 in order to provide stimulus.<\/p>\n

Despite\u00a0credit improving, flows have remained at low levels<\/strong>. Indeed, at better numbers than last year, but still way below average. This seems to be worrisome for Chinese officials as they are concerned about how the country\u2019s GDP is going to pan out.<\/p>\n

An\u00a0escalation in the trade dispute<\/a>\u00a0and fears of renewed tariffs has forced the local government to take stimulus measures once again.\u00a0<\/strong>This has left\u00a0more room for infrastructure by extending more credit. This time, some type of special bonds are going to be used as funding for infrastructure.<\/p>\n

In addition, the move came after PBOC was\u00a0prompted to inject more money<\/strong>\u00a0into the banking system. This was after the China Banking and Insurance Regulatory Commission (CBIRC)\u00a0took control of Baoshang Bank<\/strong>, a Mongolia-based bank. And, of course, it was a move to calm investors amid fears of further takeovers.<\/p>\n

Chinese CPI Hits 15-Month High, But Core Low<\/strong><\/h1>\n

This was a fairly good session for Chinese equities because of the stimulus measures with\u00a0momentum easing off following an increase in Chinese CPI inflation<\/strong>.<\/p>\n

CPI inflation isn\u2019t a major concern for the Chinese at the moment as it is a little higher than in other countries. That being said, PPI inflation \u2013 a gauge of industrial profitability \u2013 will be watched more closely as it rose a mere 0.6% year on year (YoY).<\/p>\n

This last set of data saw inflation rising to\u00a0a 15-month high<\/strong>\u00a0but the appreciation was owed primarily to pork prices. In fact, taking food and energy out of the equation, core CPI inflation rose only 1.6%.<\/p>\n

USDCNH Holds Firm Below $7, Bid Above Ascending Trendline<\/strong><\/h1>\n

\"USDCNH\"<\/a><\/p>\n

Regardless of the positive CPI figures, the\u00a0Chinese Yuan seems to be weakening<\/strong>. After the wave 4 correction completed at 6.8978, and following an\u00a0upside bias<\/strong>\u00a0marked by the ascending trendline (grey color), the probabilities that this turns out\u00a0as an impulse wave 5<\/strong>\u00a0have increased.<\/p>\n

In the short-term, the pair looks bullish with\u00a0invalidation at 6.9173<\/strong>\u00a0support and below the ascending trendline. If the downslide begins, prices could break below wave 4 at 6.8978 for\u00a0a deeper correction.<\/strong><\/p>\n

The 50% RSI just\u00a0rejected<\/strong>\u00a0bulls<\/strong>, but this may not last long. All the while, the MACD EMA\u00a0crosses above<\/strong>the slow line.<\/p>\n

By <\/strong>Orbex<\/strong><\/a><\/p>\n

 <\/p>\n","protected":false},"excerpt":{"rendered":"

By Orbex Trump Takes Positive Side Away Up until now, it has been unclear whether the failure to reach a trade agreement between the US and China was attributed to China\u2019s lack of experience when it comes to trade matters. Sources close to officials have said that the US has always had an edge on […]<\/p>\n","protected":false},"author":3,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[],"tags":[],"class_list":["post-149489","post","type-post","status-publish","format-standard","hentry","no-post-thumbnail"],"_links":{"self":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/149489","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/comments?post=149489"}],"version-history":[{"count":2,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/149489\/revisions"}],"predecessor-version":[{"id":149491,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/149489\/revisions\/149491"}],"wp:attachment":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/media?parent=149489"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/categories?post=149489"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/tags?post=149489"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}