USD/CNY could rise towards 7.20 or beyond in the coming months – Commerzbank

USD/CNY trades slightly below the 7 level. In the view of economists at Commerzbank, the pair could surge higher towards 7.20 and even beyond.

Muted inflation but rate cut unlikely

“Producer price once again fell in November by 1.3% YoY while consumer price inflation moderated further to just 1.6% YoY.”

“Muted inflation provides the PBoC room for further monetary easing, but we think they will stick to using quantitative tools instead of interest rate cuts.”

“The recent strengthening of CNY due to improved sentiment on reopening optimism provides some room for rate cuts. However, USD/CNY could surge beyond the 7 mark when markets realize the economic reality is not as rosy, and it could rise towards 7.20 or beyond in the coming months when the reopening process gets bumpy.”