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Rabobank's Michael Every reports that German Chancellor Olaf Scholz has urged dialogue with China on monetary and foreign exchange policies, citing the Chinese yuan (CNY) as being 20–30% undervalued. This follows growing concerns in Europe over China's trade surplus and perceived currency manipulation. The call for a freer float of the yuan highlights tensions over trade imbalances and potential protectionist measures. For markets, this could signal increased scrutiny of China's exchange rate practices, potentially leading to policy adjustments. Traders should monitor developments in EUR/CNY and USD/CNY pairs, as well as broader trade negotiations between the EU and China. The implications for global markets depend on whether China responds with currency reforms or faces external pressure for devaluation. Key watchpoints include ECB statements on trade imbalances and China's central bank interventions in the forex market.
