USD/CNY: Yuan gains ahead as growth rebounds – MUFG

FXStreet reports that economists at MUFG Bank discuss the yuan outlook.

“First, on the COVID-19 vaccination front, China's State Council announced the vaccination is fully covered by the government’s medical insurance and showed it has begun in Beijing and Shang Dong. Second, on the US and China trade talk front, China's foreign minister on prime time national TV signalled to President-elect Biden that China was ready for negotiations, which strengthened market's appetite for risk. Third, the EU finally agreed to a cooperative investment program with China in principle; the countries will have to work out the finer details of the agreement. The progress strengthened the ‘Silk Road’ and CNY internationalization theme. Overall, these three factors are expected to support the CNY in January, and potentially further ahead.”

“The CNY spot level may get another chance to rally just before China releases the 4th-quarter GDP on January 18. The consensus forecast is for 2020’s real GPD growth to come in between 1.8% and 2.0% YoY; thus, the 4th-quarter GDP growth rate must have been between 5.9% and 6.7%.”