Markets are much calmer today amid a slightly stronger than estimated yuan fix by the PBOC and better Chinese exports in July
- Just waking up? Global markets focus on the yuan again
- China trade balance data for July - exports up
Risk assets are able to find some reprieve so far today on the events above with Chinese trade data once again showing that exports are keeping pace despite the global growth slowdown and ongoing trade tensions with the US.
While there are positive takeaways for risk, the question is how long can things keep up in this manner? Especially when the outlook remains more blurry and uncertain.
The trade data above continues to highlight weak and subdued domestic demand as imports are still struggling. China's trade surplus to the US is also seen increasing and that raises further worries surrounding the trade dispute between the two countries.
And that will only add to woes seen in Chinese domestic demand as well as the global economic situation, which will hamper overall trade conditions in the bigger picture.
Even the yuan fixing earlier today is hardly convincing of anything positive in my view. It has been clear over the past few days that China will not let its currency depreciate in a rapid manner. As such, by guiding markets past the 7.00 per dollar threshold, they can act more freely now to keep a weaker yuan in the midst of the trade war.
That doesn't bode well for international markets as we're going to see some semblance of a currency war of sorts between countries all over the world.
Given that backdrop, I don't see how it is a positive for risk in the bigger picture and that will certainly come back to bite risk assets sooner rather than later.
