Nordea Markets' analysts view the break of 7.00 on the topside in USD/CNY as a negative game-changer for risky assets, as it marks another negative shock to the global trade outlook.

• “As long as USD/CNY will continue to trade between 7.00-7.30, we see it as a negative for risk appetite, while a break above 7.30 would mark the next major escalation. USD/CNY is an important gauge for risk appetite going forward.
• We expect USD/CNY to be headed higher towards 7.30 alongside increased trade tensions.
• Our base case remains that Donald Trump will raise tariffs to 25% on all Chinese goods before a deal can be signed in late 2019 or H1 2020. Trump is trying to force the Fed into several rate cuts before the 2020 election. We see four rate cuts in total from the Fed, including the one in July and moving the next rate cut to September.”