Retail traders should keep their eyes on the euro-dollar-yuan battle …

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Foreign exchange rates of interest …

EUR-USD= 1.1346

EUR-CNY=7.2276

GBP-USD=1.3602

GBP-CNY=8.6651

USD-JPY=115.355

JPY-CNY=0.0552

Source: OANDA

The Morning Takeaway …

The political banter by the United States regarding China is in part driven by the perceived economic necessity to penetrate deeper into the Chinese market thus the rest of Asia. Turning a population in excess of one billion into a consumption machine is American capitalism’s dream. The other part of America’s obsession has to do with what I see as a socio-political incongruity; how dare the Chinese with their communist government and state-capitalist model dare to outdo the United States’ “big tent, we are all in this together, free market, free enterprise” model?

I think stuck in the middle of the battle is the Euro Zone, capital rich, relatively speaking, but energy resource poor. Europe takes a more practical approach to conflicts emanating out of Eurasia unlike the United States which prefers stand outside and throw rocks at the window of a perceived damsel in distress. When the rock throwing fails it then leverages its military prowess and knocks down a few doors. Given its past twenty year record in the Middle East and Central Asia, it should consider changing strategy.

The data …

JPY-CNY

On 13 December 2021, the JPY-CNY=0.0560. The exchange rate on 12 January 2022 at time of writing was 0.0552. The yuan over this 30-day period strengthened slightly against the yen. Compare this to USD-JPY where on 13 December 2021, the rate was at 113.551 versus the 115.335 rate as of 12 January 2022. The yen is weakening against the dollar.

GBP-CNY

On 13 December 2021, GBP-CNY was at 8.4252. By 12 January 2022, the exchange rate increased to 8.6651, indicating weakening of the yuan against the pound. Compare this to the GBP-USD exchange rate on 13 December 2021 which equaled 1.3238. On 12 January 2022, the rate increased to 1.3602, again reflecting a weakening of the dollar against the pound.

EUR-CNY

Lastly, the EUR-CNY=7.1829 on 13 December 2021. By 12 January 2022, the rate increased to 7.2276. The yuan appears to weaken over the 30-day period. Compare this to the EUR-USD on 13 December 2021 of 1.1288. The exchange rate increased to 1.1346, indicating a weakening in the dollar against the euro.

Retail traders should continue paying attention to the political environment that the above economies are being managed in.

Alton Drew

12.01.2022

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Disclaimer: The above is provided for informational purposes and should not be construed as financial or legal advice or as creating an agreement to provide financial or legal advice.

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