The euro is flat today
Societe Generale Research discusses the relation between the euro and yuan price action.
"The inflow of money into Chinese assets is one of several reasons why the yuan is so strong. If you decide the market's top fear (tighter money) is a realistic but well-understood danger, while the bottom one, (Chinese slowdown) is under-appreciated, you could talk yourself into a pretty bearish longer-term view of the yuan," SocGen notes.
"The danger is that after letting the currency go up on inflows, the Chinese authorities let it go all the way back down as its bond and equity markets lose appeal and the pandemic improvement to their balance of payments fades. 18 months ago, USD/CNY was well above 7. The last time USD/CNY rise from below 6.5 to over 7, in 2018, EUR/USD fell from 1.25 to (eventually) under 1.10, and helped bring the Fed's 2016-2018 tightening cycle to an end," SocGen adds.
