One other wrinkle is the impact of a stronger renminbi on the rest of the world. Analysis by Bo Zhuang, chief China economist at TS Lombard, suggests that the prices of China’s exports to the US have been trending downwards in dollar terms since 2011. However, export prices were essentially flat last year and, given the subsequent rally in the renminbi, Mr Zhuang believed Chinese export prices would break out of this trend this year, rising by about 2 per cent in dollar terms. Given the current market panic about the prospect of higher inflation, and thus faster monetary tightening, in the US, the likely role of the rebounding renminbi in pushing prices higher should not discounted.
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