At this point, it’s unsure how China will respond to renewed tariff threats by Trump at this “very last” stage of negotiations. Vice Premier Liu He is originally scheduled to travel to Washington on Wednesday to wrap up the trade deal. It’s reported that Trump’s erractic change in position shocked Chinese officials. but so far there is no decision made on whether to cancel Liu’s trip or even cancel all trade negotiations.
At the same time the PBoC announced to lower the Reserve Requirement Ratio for small to medium banks starting next Wednesday on May 15. The move is expected to to release CNY 280B in long-term funds to the markets.
Chinese Yuan tumbles sharply today in reaction to all the news collectively. USD/CNH (off-shore Yuan) hits as high as 6.8214 after gapping up. Technically, the development suggests that pull back from 6.9800 (2018 high) has completed at 6.6699, after hitting 38.2% retracement of 6.2354 to 6.9800 at 6.6956. It’s a bit early to say, but 7 handle in USD/CHN could be at risk again if trade tensions worsen further.