USD/CNY likely to range trade for now, head for 6.60 once US and China reach a trade deal in April-May, says Scotiabank

The USD/CNY currency pair is expected to range trade for now and then head for 6.60 once the United States and China reach a trade deal in April-May. Further, the CFETS RMB Index will likely fluctuate at around the 95 level at the moment, according to the latest research report from Scotiabank.

China’s improving risk sentiment and easing financial conditions are likely to boost A-shares further along with elevated government bond yields. According to a Bloomberg survey released Sunday, China’s A-shares could eclipse other EM stocks.

In the meantime, the CNY 1-5Y ND IRS curve has re-steepened markedly on upbeat Chinese factory activity data. The nation’s other economic and financial data due this week and next are expected to beat market expectations as well, the report added.

The State Council, China’s Cabinet, has pledged more tax cut and fee reductions in a bid to shore up the economy. The nation will take measures to reduce government fees and operating service charges in order to further reduce burdens on businesses and individuals, according to a statement of the State Council executive meeting chaired by Premier Li Keqiang last Wednesday.

US President Donald Trump said in an Oval Office meeting with the Chinese delegation last Thursday that it may take another four weeks or more to secure an "epic" trade agreement, while stopping short of announcing a final trade deal with China.

Also, Chinese President Xi Jinping said in a letter to Trump that the two nations have made new concrete progress on the text of the trade deal and called for an "early conclusion of negotiation" on the text of a trade deal between the two nations.

Meanwhile, Chinese Vice Premier Liu He said last Thursday that a new consensus has been reached between China and the US on the text of a trade agreement that they are negotiating, according to Xinhua.