Analysts at TD Securities explained that China’s growth targets are way above actual trend and suggest that further easing is to come.
Key Quotes:
“The 2016 growth target range of 6.5% – 7% is around 2 percentage points above where we see the actual underlying growth trend, implying further strong easing efforts.
Monetary policy will be forced to bridge the gap between targets and reality, including forceful total social financing efforts, partially to offset the lower than expected on-balance sheet fiscal deficit target of 3% of GDP.
CNY has been trading stronger against the USD, but surprisingly weaker via the CNY-CFETS basket, which is trading at its lowest level since late 2014.
Expect a weak CNY bias to persist until FX valuation is consistent with the needs domestic monetary conditions; we target USDCNY at 6.95 by end of year.”
(Market News Provided by FXstreet)