The Chinese yuan is rallying midweek against some of its most traded currency rivals. Despite vehicle sales tumbling in June and inflation coming in lower than expected, the yuan is strengthening, which could be attributed to renewed trade negotiations between the worldâs two largest economies.
According to the China Association of Automobile Manufacturers (CAAM), car sales fell 9.6% in June from the same time a year ago to 2.06 million units. This represents the 12th straight monthly decline. Passenger automobiles and commercial vehicles slipped 7.8% and 17.8%, respectively. It should be noted, though, that sales of new energy vehicles surged 80% last month.
The Chinese automobile industry has had a rough couple of years, unable to top the three million mark since the end of 2017.
On Wednesday, the National Bureau of Statistics of China reported that the consumer price index dipped 0.1% in Jun. This is lower than the median estimate of 0.2% and represents the second contraction in 2019. For the last two years, the inflation rate has only reached the 1% threshold twice.
Investors will now look ahead to trade numbers on Thursday. Analysts anticipate imports to fall 4.5% and exports to slip 2%. Overall, the balance of trade is expected to come in higher in June at $44.65 billion, up from $41.66 billion in May.
Financial markets breathed a sigh of relief when it was reported that US Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin spoke to Chinese Vice Premier Liu He and Commerce Minister Zhong Shan over the telephone, promising that âboth sides will continue these talks as appropriate.â This is a positive signal that the US-China trade war could finally come to an end sometime this year, bringing some certainty to international commerce and the global economy.
The USD/CNY currency pair tumbled 0.25% to 6.8729, from an opening of 6.8880, at 15:00 GMT on Wednesday. The EUR/CNY fell 0.18% to 7.7211, from an opening of 7.7352.
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