​EBC Markets Briefing | Yuan keeps climbing on Trump's friendliness

The Chinese yuan strengthened to the highest level since November 2024 on Thursday as concerns about the future independence of the Fed undermined faith in the soundness of the country's monetary policy.

According to a Wall Street Journal report, Trump is actively considering replacements for Chairman Jerome Powell. But empirically that seems a fresh bluff to prod policymakers to take action.

US trade policies will likely slow down global economic growth and rekindle inflation at home, where there is a 40% of a recession in the second half of this year, JPMorgan analysts said.

The US bank has a bearish outlook on the US dollar due to growth-supportive policies in other economies and an expected 100-bp rate cuts by the Fed between December and spring 2026.

Trump on Tuesday appeared to undermine years of US sanctions on Iran, giving its biggest customer China the green light to carry on buying its oil. That is seen as a means of reinforcing the ceasefire deal.

The apparent shift also comes as the Trump administration seeks to hammer out a new trade framework with China. Allowing the carve out may be an effort to send positive signals to Beijing.

The yuan kept rising after the golden cross is formed a week ago, but bearish MACD divergence is indicative of a potential pullback. A retest of 7.1785 per dollar may occur in the short run.

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